Fund Managers Say Bring On the Double Dip - The Wall Street Journal

One might think the W would be the most ominous of scenarios.
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Aug. 19, 2020 10:11 am ET

The letter of the month is…W.

That is perhaps the most striking takeaway from Bank of America’s monthly survey of global fund managers. Just 17% expect a V-shaped recovery for the economy. The plurality, some 37%, now expect a W shape, also known as a double dip. That is up from 30% in the prior month’s survey. And 31% now expect a recovery that resembles a U.

One might normally think that a double-dip recession isn’t ideal for people who make their living managing investments. The uncertainty that a renewed downturn would bring might make W the most ominous of possible letter-shaped scenarios.

But then the S&P 500 hit a record on Tuesday after one of its most furious rallies ever. Unless you were in the right asset classes, you missed much of it. The two investments said to be most crowded in the survey are U.S. technology stocks and gold. Large tech companies already have shown themselves resilient to the economic impacts of the coronavirus, and indeed some appear to be net beneficiaries of a stay-at-home world. As for gold, it would likely rally in response to whatever the Federal Reserve does in the event of a new downturn.

Fund managers might be hoping markets give them a chance to catch up.