Trade War Fears Top Global Fund Manager Concerns at 80%

Bank of America's latest global fund manager survey has revealed that the potential for a trade war, sparked by policies from the Trump administration, to trigger a global economic recession is now the most severe tail risk facing markets. This finding underscores the persistent concerns among global investors about geopolitical tensions and their potential ripple effects on financial markets.

The survey, which has been conducted annually for 15 years, found that 80% of fund managers identified "trade wars leading to global recession" as the primary tail risk. This level of consensus is the highest recorded since the survey began, highlighting the significant impact of geopolitical instability on market sentiment.

While trade wars remain the top concern, other risks were also noted by fund managers, though to a lesser extent. The second most significant risk, cited by 10% of respondents, is the potential for inflationary pressures to force the Federal Reserve to implement aggressive interest rate hikes. Additionally, 7% of respondents expressed concern over the possibility of a dollar collapse due to capital outflows. Only 1% of respondents identified the "artificial intelligence bubble" as the most significant market risk.

The survey's results indicate that geopolitical instability is increasingly dominating investor sentiment, particularly as the global economy continues its fragile recovery from the pandemic. Central banks worldwide are adjusting their monetary policies, adding to the market's sensitivity to geopolitical risks. This heightened sensitivity underscores the need for investors to remain vigilant and strategic in their planning.

The survey's findings serve as a stark reminder of the interconnected nature of global economies and the far-reaching consequences of geopolitical tensions. As the world continues to navigate the complexities of international trade and economic recovery, the insights from this survey are crucial for investors and policymakers alike. The survey results reflect a growing unease among fund managers about the potential for trade disputes to escalate into a full-blown economic crisis, highlighting the need for proactive measures to mitigate these risks.