Concerns over inflation and central banks are "rapidly diminishing" among global investors, the latest Bank of America Fund Manager survey has found. 

Nearly half of respondents believed that high inflation keeping central banks hawkish was the main tail risk for markets in July. In November, however, this number fell to just 25% as geopolitical risk jumped to the top spot.  

The conviction that the Federal Reserve has reached the peak of its hiking cycle is now the strongest since investors began providing their view on the matter. According to the survey, over 76% of respondents believe the rate hike cycle is over, up from 60% the previous month.

Global investors remain set on Goldilocks soft landing despite bearish stance

Consensus is for lower short-term rates and lower inflation, the Bank of America found, with expectations for both hovering near Global Financial Crisis highs. Only 6% expect global inflation to inch higher in 2024, and just 6% expect higher short-term rates.

‘Soft' and ‘no' landing expectations were back to their summer high in November, rising to 74% from 64% last month, while ‘hard landing' fears eased to 21% of respondents from 30% in October. 

According to BofA, two out of three investors surveyed see a ‘soft' landing as their base case scenario for the global economy next year. 

Last month, the yield on the 30-year US Treasuries went as high as 5.175% on concerns that central banks would keep rates higher for longer. However, a record 61% of investors now predict lower bond yields in twelve months' time. 

Following the market rout in October and despite the ‘year of the bond' failing to deliver in 2023, more than half of fund managers expect bonds to be the best performing asset class in 2024.

BofA: Global investors turn away from EM equities as China growth optimism slumps

November saw the third largest overweight in bonds in the last two decades, as only in March 2009 and December 2008 were investors more overweight bonds. 

Meanwhile, a stable macro outlook and much more optimistic view on rates has taken investors' equity allocation overweight for the first time since April 2022, rising from a net 4% underweight in October to a net 2% overweight in November.

Relative to history, investors are long bonds, bonds, Japan, telecommunications and US this month, and are underweight Eurozone, UK, industrials, and emerging markets. 

The most crowded trades during the month were long Big Tech (38%), short China equities (22%), long T-bills (11%), short 30-year Treasury (7%), short REITs (6%) and long Japan equities (6%).