Survey scope and headline shift
Bank of America's European Fund Manager Survey for April collected answers from 90 participants managing $247 billion in assets between April 2 and April 9. The poll recorded a pronounced change in growth expectations: a net 25% of respondents now expect European growth to slow over the next year, reversing sharply from the net 66% who anticipated acceleration in February.
Timing note
About 80% of participants provided their responses before the U.S.-Iran ceasefire announcement referenced in the survey period.
Inflation shock and downside risks
Around 42% of European investors identified the inflation shock stemming from Iran as the largest downside risk to global growth, displacing concern over the U.S. consumer, which had been the top worry the prior month. That shift in risk perception is mirrored in a record share of respondents viewing stagflation as the prevailing macro regime: 58% now describe slowing growth combined with sticky inflation as dominant, up from 50% in March.
Oil prices and inflation expectations
Energy markets are central to the worry. A majority - 61% of investors - now expect Brent crude to remain above $80 a barrel by year-end. That view is accompanied by a net 71% forecasting higher European core inflation over the next twelve months, the largest proportion anticipating higher core inflation since June 2021.
Interest rate and yield curve outlook
Rate expectations shifted with the inflation outlook: a net 4% of investors expect higher global short-term rates over the coming year, the strongest reading since November 2022. At the same time, expectations for a steeper yield curve have diminished notably as concerns about growth temper the impetus for a broad bond selloff.
Perceived risks for equities
Bank of America strategists, led by Andreas Bruckner in the survey commentary, pointed out that a plurality of respondents (38%) now view hawkish central banks as the biggest risk for equities, a share that is nearly double the level recorded the previous month.
Equity sentiment and positioning
Despite the downward revision to growth views and higher inflation concerns, outright optimism on European equities has shown resilience. A net 33% of respondents still expect near-term upside for European stocks, largely unchanged from the prior month, while a net 63% anticipate gains over the next twelve months, down from 71% previously. Investors also signaled reluctance to pare back equity exposure aggressively: 46% identified the biggest portfolio risk as cutting equities too much and missing a rally, more than double the reading from the prior month.
Sector preferences and underweights
On sector allocation, Basic Resources replaced Financials as the most favored European supersector, followed by Telecoms and Healthcare. Respondents reported trimmed exposures to Banks, Industrials and Insurance, while Autos and Media continued to be the most underweighted sectors. Over the next twelve months, Utilities and Energy were expected to be the best-performing sectors, a stance consistent with expectations for persistently elevated oil prices.
Catalysts for a recovery
Germany's fiscal stimulus remained the most commonly cited potential catalyst for a European growth recovery, though the share citing it fell to 50% from 68%. Meanwhile, the probability assigned to a Ukraine ceasefire as a recovery catalyst rose to 25% from 7%.
Bottom line
The April FMS captures a notable recalibration among European fund managers: growth expectations have swung toward slowdown, inflation and oil price risks have climbed the list of concerns, and stagflation is now the dominant macro narrative for a record share of respondents. Even so, many managers remain wary of trimming equity holdings too much, keeping downside from forced de-risking an important factor in portfolio decision-making.