BofA survey shows European fund managers eye growth despite caution

Investing.com -- Bank of America's European Fund Manager Survey reveals that 35% of respondents expect European economic growth to pick up in the coming months, while 97% do not anticipate a recession in Europe over the next 12 months. The 97% figure marks the highest reading since 2007.

The survey shows 65% of investors now expect a higher-for-longer interest rate environment, up from 23% last month. Energy prices and inflation remain key concerns, with 53% of fund managers viewing declining energy prices and easing inflation as the main upside risk to global growth. Meanwhile, 41% cite energy price shocks and renewed inflation pressure as the primary downside risk.

A net 42% of investors are overweight cash, the highest level since February 2023. The majority of respondents, at 56%, expect the European Central Bank deposit rate to be higher in 12 months, while 38% anticipate higher euro-area government bond yields.

Despite the cautious positioning, equity sentiment remains positive. A net 53% of investors expect European equities to rise over the next one to three months, with respondents forecasting 5.7% upside over the next year.

Fund managers expect European forward earnings per share to increase by 7.4% over the next 12 months, and 76% believe earnings upgrades will drive further market gains. Some 47% expect European equities to outperform U.S. stocks over the next 12 months, compared with 26% who expect U.S. outperformance.

Banks remain the largest consensus overweight position, while industrials recorded the biggest improvement in positioning. Autos remain the largest underweight sector, and travel and leisure moved into underweight territory. France was the least preferred market at a net -56%, reaching a record high.

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