Over half of money managers bet on global recession this year

Over half of investors are fretting over the global economy tumbling into recession this year, new figures released today show.

Some 58 per cent of money managers think global output will shift into reverse, up from a minority of 47 per cent, according to Bank of America’s latest global fund managers’ survey.

The latest reading is the highest since May 2020, when much of the world was in the teeth of the worst of the Covid-19 crisis.

Inflation across the world has surged to levels not seen in generations, squeezing consumers and businesses.

Figures published tomorrow are expected to show living costs jumped 9.8 per cent annually in July in the UK, a fresh 40-year high.

In the US, inflation is running at nearly nine per cent, while prices in the eurozone have climbed at the quickest pace since the creation of the common currency in 1999.

Wages have failed to keep pace, prompting experts to forecast consumers in rich countries will rein in spending, triggering an economic slump.

The Federal Reserve and Bank of England have hiked interest rates rapidly in response, partially ending the era of cheap money that supported the global economy after the financial crisis.

The European Central Bank delivered a shock 50 basis point hike last month, but borrowing costs are still cheap on the Continent.

But, investors are convinced inflation will cool over the next year, slowing the pace of rate hikes.

“Sentiment remains bearish, but no longer apocalyptically bearish as hopes rise that inflation and rates shocks end in coming quarters,” Bank of America said.

Cash holdings dropped to 5.7 per cent of fund managers’ holdings, down from 6.1 per cent, indicating risk appetite is firming.