Overview
Bank of America’s European Fund Manager Survey reports that 35% of respondents believe European economic growth will accelerate in the coming months. At the same time, an overwhelming 97% of surveyed managers say they do not expect a recession in Europe over the next 12 months - a reading the survey notes as the strongest since 2007.
Interest-rate and inflation outlook
Survey participants have markedly shifted their interest-rate expectations. A net 65% now expect a higher-for-longer interest rate environment, up sharply from 23% in the prior month. Energy prices and inflation remain central risks and opportunities: 53% of fund managers identify falling energy prices and easing inflation as the principal upside risk to global growth, while 41% point to energy price shocks and renewed inflation pressure as the principal downside risk.
Portfolio positioning and fixed income views
Managers have increased defensive cash allocations: a net 42% report being overweight cash, the highest level recorded since February 2023. On policy expectations, 56% expect the European Central Bank deposit rate to be higher in 12 months, and 38% anticipate higher euro-area government bond yields over that period.
Equity sentiment and earnings expectations
Despite defensive cash holdings, equity sentiment appears constructive. A net 53% of respondents expect European equities to rise in the next one to three months, and the group’s collective forecast points to 5.7% upside for European equities over the next year. Forward earnings per share for Europe are expected to increase by 7.4% over the coming 12 months, and 76% of managers say earnings upgrades would be the main driver of further market gains.
Relative performance views and sector preferences
Views on regional equity leadership are mixed but tilt toward Europe: 47% of managers expect European equities to outperform U.S. stocks over the next 12 months, while 26% expect U.S. outperformance. On sector positioning, banks remain the largest consensus overweight. Industrials saw the most notable improvement in positioning. By contrast, autos remain the largest sector underweight, and travel and leisure have moved into underweight territory.
Country preferences and market signals
Among national markets, France is the least preferred, with a net -56% position that the survey records as a record low preference. The report also includes short-form market indicators embedded in its presentation showing moves in major indices and commodity benchmarks.
Note on interpretation: The survey reflects the views of the participating fund managers at the time of polling. It reports their expectations and positioning without asserting causation or predicting specific market outcomes.