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Investing.com - South African fund managers remain strongly bullish on equities while maintaining historically low cash levels, according to Bank of America’s latest Fund Manager Survey released Monday.
The survey shows 67% of managers are equity bulls, with the same percentage seeing more buys than sells in the market. Cash levels have dropped to a survey low of 4.3%, which typically supports equity returns. Managers expect the All-Share index to reach 109,000 in 12 months, with anticipated total returns of 16% for equities compared to 12% for bonds and 8% for cash.
Looking ahead, fund managers forecast lower interest rates over the next 12 months, with the repo rate expected to reach 6.81% and the R2035 bond yield at 9.50%. A majority (67%) anticipate a rate cut in July, with the repo rate expected to bottom at 6.63%. The USD/ZAR exchange rate is projected to be 17.26 in 12 months.
Positioning data reveals high allocations relative to historical norms in gold (1.5 standard deviations), equities (1.1sd), life insurance (1.1sd), bonds (1.0sd) and platinum (1.0sd). Conversely, healthcare (-2.2sd), telecommunications (-1.5sd), cash (-1.4sd) and offshore investments (-1.3sd) show significantly lower allocations than historical averages.
The banking sector ranks as the most preferred investment area among fund managers, followed by apparel retail, software, and diversified industrials for the next 12 months. Real estate sits at the bottom of sector preferences, with healthcare and telecommunications also among the least favored sectors, while defensive sectors like food producers, tobacco, and life insurance are gaining popularity.
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