Global Stock Market Bullish Sentiment Hits 7-Month High, 28% Net Bullish

Global stock market bullish sentiment has surged to a seven-month high, according to a recent survey by a prominent U.S. bank. The survey, conducted from September 5 to September 11, revealed that a net 28% of global fund managers are bullish on stocks, the highest proportion since February of this year. The survey included 165 fund managers overseeing a combined 260 billion dollars in assets.

This shift in sentiment is driven by a significant improvement in global economic growth expectations. Only a net 16% of investors now anticipate an economic recession, marking a notable change in outlook over the past year. The survey also indicated that the risk of a "recessionary trade war" has diminished, encouraging a surge of bullish investors into the stock market.

The MSCI All-Country World Index has reached an all-time high, largely due to sustained enthusiasm for artificial intelligence, which has driven up the stock prices of tech giants. Additionally, the impact of U.S. tariffs has been less severe than initially expected, further boosting market confidence.

Investors are also anticipating that the Federal Reserve will soon begin lowering interest rates to prevent a U.S. economic downturn. The market has already priced in a 25 basis point rate cut, with nearly half of the survey respondents expecting at least four rate cuts within the next 12 months.

However, concerns remain about the independence of the Federal Reserve. Approximately 26% of respondents identified a second round of U.S. inflation as the biggest tail risk, while 24% expressed worries about the weakening independence of the Federal Reserve and potential dollar depreciation. Recent actions by the U.S. administration, including pressure on the Federal Reserve to cut rates and the dismissal of a Federal Reserve board member, have raised concerns about the central bank's autonomy.

Despite these concerns, the overall sentiment among survey participants remains optimistic about further gains in the U.S. stock market by the end of the year. This optimism is fueled by strong corporate earnings and the belief that artificial intelligence is enhancing productivity. The survey also highlighted that the most popular trade among global fund managers is going long on the "Magnificent Seven" tech stocks, with 42% of respondents choosing this strategy. Other popular trades include going long on gold (25%), shorting the U.S. dollar (14%), and going long on cryptocurrencies (9%).