Feb 19, 2020 - Economy & Business

Fund managers are getting a bit more bearish

Bangladeshi workers preparing reinforcing steel at a construction site in Dhaka on Feb. 16. Photo: Mamunur Rashid/NurPhoto via Getty Images

Expectations of global growth were cut in half in the latest Bank of America survey of asset managers.

What's happening: The survey showed money managers are less bullish this month than in January, but had also cut their cash holdings to 4.0% from 4.2%, which was the lowest since March 2013.

Details: Only a net 18% of investors surveyed said they expect the global economy will improve in the next 12 months, down from 36% in January. However, that number remains well above the lows of 2019.

  • 67% of investors surveyed expect below-trend growth and inflation over the next year, up 5 percentage points from January.
  • Investors also slashed their expectations for inflation — net 60% of respondents expect global inflation metrics will not rise in the next year.

The big picture: When asked what would increase their expectations for inflation to rise, 26% of those surveyed responded Modern Monetary Theory, while 24% selected a G7 commitment to infrastructure spending.

Of note: "February saw big rotation into US bonds, tech, and EM, out of banks, energy and value," BofA analysts said in the report.

Go deeper: Asset managers urge caution in 2020

Go deeper

Philly Fed index boomed in January

Data: Federal Reserve Bank of Philadelphia, projection from Wall Street Journal; Chart: Axios Visuals

The Philadelphia Fed's manufacturing business outlook rose to near its highest level on record and notched its biggest reading above economists' expectations in history.

The big picture: Analysts at BMO Capital Markets note that the monthly reading is among the highest in history (in the 99th percentile) going back 30 years and marked the largest two-month jump since 1995.

The Fed may be setting the table for 2020 rate cuts

Illustration: Sarah Grillo/Axios

The Fed looks to be laying the groundwork to lower U.S. interest rates this year, just as they did in April 2019 before cutting rates in July, September and October.

Why it matters: A Fed rate cut makes taking on debt more attractive for U.S. consumers and businesses, helping to juice the economy, but also puts the central bank in a weaker position to fight off a potential recession.

10-year Treasury yield drops below 1.3% for the first time in history

Data: FactSet; Chart: Axios Visuals

The bond market set a significant milestone on Thursday, with bond yields — as measured by the yield on the benchmark 10-year Treasury note — dropping below 1.3% for the first time in history.

By the numbers: The yield was above 3% as recently as November 2018.