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Persistent concerns over slowdown dampen investor sentiment
According to Bank of America's global fund manager survey, investors are remaining bearish about the state of the U.S. economy in early July. Despite rising bets that the Federal Reserve will successfully engineer a soft landing, sentiment among fund managers remains "stubbornly low." Roughly 60% of investors are bracing for a weaker economy over the next year.
The survey also found that 45% of participants identified high inflation as the top risk to markets, while 18% highlighted a potential credit crunch and global recession as the biggest threat. Another 15% are worried about geopolitical situations worsening, such as the war in Ukraine or tensions between China and Taiwan, while just 10% fear a systemic credit event.
The poll of 262 fund managers was conducted from July 6-13 and is based on cash positions, equity allocation, and economic growth expectations. Despite concerns about a weaker economy, a majority of investors still see a soft landing as the most likely outcome for global economic growth, with 68% predicting a soft landing, 21% predicting a hard landing, and 4% predicting no landing.
However, respondents are still projecting a mild recession within the next 12 months. Forty-eight percent expect the start of a global downturn by the end of the first quarter of 2024, while one-quarter anticipate a downturn could begin by the end of 2023.
Despite these concerns, there are signs of optimism within the survey. Expectations on earnings per share are now the least pessimistic since February 2022, and a large majority still expect the global profit outlook to worsen. However, this is the smallest number in almost 18 months.
The fund managers are also anticipating a jump in profits due to the adoption of artificial intelligence (AI). About 42% of investors said AI will increase profits over the next two years.
Overall, the survey suggests that while investors remain cautious about the state of the U.S. economy, there are some signs of optimism. The majority of investors still expect a soft landing for global economic growth, and there is a belief that AI will drive profits in the coming years.
As for the stock market, the rally that began in the first half of 2023 seems poised to continue in the second half. The Dow Jones Industrial Average touched a fresh high for the year, and the S&P 500 is up more than 19% from the start of the year. This suggests that despite concerns about the economy, investors are still finding opportunities in the market.
The current state of the U.S. economy, as indicated by the Bank of America's global fund manager survey, reveals cautious sentiment among investors. This sentiment includes concerns about a weaker economy, high inflation, potential credit crunch, geopolitical tensions, and the possibility of a mild recession within the next 12 months. However, despite these worries, there are pockets of optimism.
For a newly formed business, these findings can provide valuable insights and guide decision-making. It is crucial for an LLC or any emerging company to understand the broader economic landscape in order to navigate potential challenges and seize opportunities.
While a majority of investors still expect a soft landing for global economic growth, it is important for a start-up to plan for various scenarios and incorporate flexibility into its strategies. Focusing on diversifying revenue streams and conducting thorough market research can help mitigate risks associated with changing economic conditions.
Additionally, the increasing adoption of artificial intelligence (AI) presents an opportunity for new businesses. With 42% of investors anticipating a jump in profits due to AI implementation, exploring how AI can enhance operations and customer experiences should be a priority for a newly formed business. Leveraging technology to gain a competitive edge and enhance efficiencies can help drive growth and navigate potential economic downturns.
Furthermore, the current optimistic outlook in the stock market provides an environment where funding and investment opportunities may still be available for start-ups. It is crucial for a new business to present a compelling value proposition, demonstrate growth potential, and highlight differentiation to attract investors.
Overall, while the survey may depict caution among investors regarding the U.S. economy, strategic planning, an emphasis on technological innovation, and staying attuned to market trends can help a newly formed business thrive and succeed, even amidst potential challenges.
Original Article First Published at: https://www.foxbusiness.com/economy/investors-still-bearish-us-economy-slowdown-fears