Bank of America’s monthly fund manager survey was unusual in November. The U.S. presidential election took place as leaders fielded questions from the U.S. bank, and the election results were a before and after in the minds of those surveyed. Donald Trump’s victory caused respondents to significantly improve their expectations for economic growth, not only in the United States, but also in the global economy. Expectations of inflation peaks in 12 months are once again in the majority, and reach levels not seen since the summer of 2021. In this context, managers are once again orienting their portfolios towards the American marketand they point out that the main beneficiaries will be the country’s stock market, particularly that of small caps, and the dollar.
The Republican victory in the US elections has sparked optimism among fund managers. The results of Bank of America’s November survey are clear: before knowing who would win the election, the survey results pointed to some improvement in expectations for economic growth around the world, but that does not did not end up convincing the skeptics. After 12 months, in fact, respondents still expected the economy to slow its growth rate; However, After knowing the election results, growth expectations skyrocketed to the highest levels since August 2021. There are now a net 23% of respondents (the percentage of executives who say they are positive about growth, minus the percentage of those who are pessimistic) who expect a stronger global economy this year. next.
This renewed optimism has, unsurprisingly, focused even more on the United States. Before the results were known, year-over-year growth expectations were negative, with a net rate of -15% of respondents expecting a deterioration, and this figure reversed to 28%. The recovery has been so rapid that the possibility of a global economic downturn in the next 12 months has almost disappeared, just like the scenario expected by analysts for more than a year: now only 55% of those surveyed expect an economic slowdown. the landing, and the possibility that the economy will not need to land stands at 33%, while in October, when the last survey was carried out, it was only 14%. Only 8% of respondents expect a hard landing, reflecting the improved macroeconomic outlook this month.
A shift towards American assets
With the election results on the table, leaders have no doubt that the big winners of the election will be American workers. Before knowing the results, when asked which asset class would perform best in 2025, the answers were split between “the global stock market” and “the American stock market”. However, once Trump’s victory was known, responses clearly leaned toward the latter, with nearly 45% of respondents pointing in that direction, above the 21% that the global stock market continues to indicate.
Within the American stock market, small caps are now emerging as the big winners of the elections. Before the election, respondents were highlighting the Nasdaq as the stock index that would do best in 2025, but after the election, the Russell 2000 overtook it to the right and is positioned as the favorite for next year by 35 % of respondents. . This confirms the extent to which leaders view Trump’s proposed economic policies, whether tax cuts or high tariffs, as are seen as particularly positive for small and medium-sized American businesses.
Not only is the US stock market gaining visibility with Trump’s victory, but the dollar is also emerging as one of the biggest winners. Before knowing the election results, managers were particularly bullish on the Japanese yen, which led polls as the preferred currency for 2025. However, the election upended those expectations, and respondents placed the dollar at the top of the forecasts. looking ahead to next year, with 45% highlighting it as the best currency for this period. Gold has also seen its expectations improve and is the second favorite for 2025.
The big danger is once again inflation
All is not rosy for those interviewed. The improving outlook for economic growth is associated with a danger: the return of inflation. Leaders are aware that the price to pay for the growth that Trump’s policies will generate is higher prices and a loss of purchasing power in the country.. Inflation expectations climbed to August 2021 highs in surveyand for the first time since that year, executives surveyed by Bank of America believe the CPI will be higher over the next 12 months than it is now.
In fact, it is a source of concern, as those surveyed acknowledge that the greatest danger they currently perceive for the global economy is a further acceleration in price increases, a possibility that worries them more than the geopolitical conflicts. , secondly, or that a recession occurs in the United States, a scenario which already seems almost excluded.
