Investor Confidence Soars 30% as Earnings Expectations Rise

Investor sentiment has reached its most optimistic level since February, driven by a significant increase in expectations for corporate earnings. According to the July global fund manager survey by an American bank, the investor confidence index has risen to its highest point in five months, climbing from 3.3 to 4.3 within a month. This index encompasses growth expectations, cash levels, and stock allocations.

The survey also revealed that a net 11% of respondents anticipate a decline in global corporate profits over the next 12 months. This figure represents a notable improvement from 26% in June and 90% in April, marking the most significant three-month improvement since August 2020.

However, cash levels have decreased from 4.2% last month to 3.9% in July, triggering a "sell signal." Additionally, investor risk appetite has seen its largest increase in nearly three months, with approximately 40% of fund managers taking on above-normal levels of risk.

The bank's survey defines risk appetite as the continued outperformance of U.S. stocks relative to global economic growth expectations. This month, a net 31% of respondents expect global economic growth to slow, an improvement from 46% in June and 82% in April. Currently, the S&P 500 index has risen by 10.9% compared to a year ago.