Investors Bullish on Global Economy Soft Landing: Bank of America Survey Shows High Confidence

Investors are growing increasingly confident that the global economy is on track for a soft landing, with inflation easing without a significant downturn in economic activity. According to Bank of America’s August Global Fund Manager Survey, 79% of respondents believe a soft landing is the most likely scenario for the global economy in the next 12 months, marking the highest percentage since May 2023.

Economists are optimistic about the economy’s trajectory, citing recent data that shows signs of cooling in the labor market. Despite this, layoffs remain low and the rapid rise in the unemployment rate has slowed. Inflation is also trending downwards towards the Federal Reserve’s 2% target, while a fresh reading on August retail sales indicates that consumer spending remains robust.

“We still have significant consumer demand,” said Bank of America Securities senior US economist Stephen Juneau. “We’re not really seeing investment slow down sharply. So where’s that kind of hard landing coming from? We just don’t see it … in the data right now.”

The survey’s release coincides with expectations of an interest rate cut from the Federal Reserve, the first since 2020. Market participants are divided on the extent of the rate cut, with a 67% chance of a 50 basis point cut and a 33% chance of a smaller 25 basis point cut, according to the CME FedWatch Tool.

A 50 basis point cut from the Fed could be the best outcome for stocks, according to Morgan Stanley chief investment officer Mike Wilson. He believes this move would serve as an “insurance cut” ahead of stabilizing macro data.

Goldman Sachs chief US equity strategist David Kostin noted that if the market prices in less Fed easing due to a resilient economy, equities could still rise despite higher bond yields.

Overall, the consensus among investors and economists is that the global economy is headed for a soft landing, supported by strong consumer demand and manageable inflation. The upcoming Fed rate decision will provide further clarity on the central bank’s stance and its impact on financial markets.

In conclusion, the data and sentiment point towards a positive outlook for the global economy, with a soft landing scenario becoming increasingly likely. Stay tuned for the Fed’s decision and its implications for investors and markets.

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