The Bank of America's (BofA) latest March Global Fund Manager Survey (FMS) has brought some encouraging news: a noticeable uptick in global growth expectations. It seems the specter of recession is fading away, as fund managers show their highest risk appetite since November 2021. This newfound optimism has spurred a 2-year peak in stock allocations and spurred interest in European, emerging markets (EM), and financial sectors.

Interestingly, even with this positive shift, cash levels nudged up to 4.4%, keeping the BofA Bull & Bear Indicator at a bullish 6.5, though not hitting extremes. The survey reveals a growing consensus (62%) around a soft landing scenario within the next year, with fewer fund managers bracing for a hard landing compared to October 2022.

Investor sentiment on earnings per share (EPS) is at a two-year high, with a keen interest in companies paying back their shareholders, marking the most significant demand for this since July 2015. Looking ahead, a whopping 84% of those surveyed anticipate a drop in short-term interest rates over the next year, and 40% foresee bond yields decreasing. Nonetheless, inflation tops the list of tail risks.

Asset allocation trends show a marked preference for EM and European stocks—the most substantial shift since April 2017 and June 2020, respectively. Meanwhile, there's been a pivot away from the US, tech, and consumer discretionary sectors, with the latter experiencing its most considerable allocation reduction since May 2015.

This surge in risk appetite, the highest since December 2021, indicates a shift towards low dividend stocks. For those eyeing contrarian trades, technology stocks seem ripe for a potential bubble, while positions in the UK, commodities, and resources might be wise for a stagflation scenario. In the face of a hard landing, staples and utilities could offer some security.

The March FMS has hit a bullish stride not seen since January 2022, driven by easing recession fears and a brighter view on the global economic landscape. With higher inflation still looming as the top concern for 32% of investors, followed by geopolitics and economic hard landing, the path ahead remains cautious yet optimistic.

In essence, the BofA March Global Fund Manager Survey underscores a growing confidence among fund managers in global growth, with a strategic tilt towards European, EM, and financial sectors. While inflation worries linger, the overall sentiment is bullish, reflecting a robust appetite for risk in the face of a recovering global economy.