NEW YORK - Investor sentiment has taken a positive turn as a recent Bank of America survey revealed that a majority of investors are expecting bond yields to decline in 2024. The survey, which reflects the opinions of investors managing significant portfolios, found that 80% are projecting a drop in bond yields, driven by anticipated lower inflation and interest rates. This optimism is linked to recent decreases in yields that have contributed to the S&P 500's most extended winning streak in two years.
Trust CO-CIO Keith Lerner attributed this buoyant market outlook to the softening of key economic indicators, such as the Consumer Price Index (CPI), which reported prices increasing at their slowest pace in two years. This data has led to a notable decrease in the 10-year Treasury yield (^TNX), which fell to 4.4%, marking the largest intraday move since the banking crisis in March. The shift in investor expectations comes amidst concerns over potential Federal Reserve rate hikes and surprise Treasury issuance.
Earlier insights from between November 3 and November 9 suggested that investors were already reducing their recession risk expectations, with 74% of those surveyed predicting a 'soft' or 'no' landing for the global economy within the next year. The percentage of investors bracing for a 'hard' landing decreased from 30% to 21%, and cash levels among investors dropped to 4.7%. For the first time since April 2022, investors have moved to an overweight position in equities, leading to gains in equity markets.
The shift in sentiment is also reflected in market behavior, with BofA's analytics team noting increased market optimism. Investors now see a 76% chance that the Federal Reserve will not raise rates further, aligning with recent Fed commentary and economic reports that have reassured markets.
The current focus among investors is on corporate balance sheets and the upcoming decisions by the US Federal Reserve, particularly as they await further CPI reports. These factors remain pivotal to maintaining and potentially enhancing investor confidence as markets adapt to changing economic conditions.
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