A recent Bank of America survey has revealed that investors are now becoming more apprehensive about geopolitical conflict than inflation.
What Happened: According to a Business Insider report, the survey conducted by Bank of America has shown a significant change in investors’ risk perceptions. In September, monetary tightness caused by inflation was identified as the main market risk by 40% of the respondents. However, in the latest survey, this number has decreased to 25%.
A combination of the Federal Reserve’s decision to hold off on further interest rate increases for two consecutive policy meetings and a lack of indicators signaling a resurgence in inflation has contributed to this shift in market sentiment. Some market observers are even anticipating a significant drop in interest rates in the coming year.
Why It Matters: Meanwhile, the proportion of investors who view geopolitics as the top risk has jumped from 14% to 31% in the last two months. This rise is in line with an intensification of geopolitical conflicts, specifically the Israel-Hamas conflict. Notable investors like Ray Dalio and JPMorgan‘s Jamie Dimon have also voiced concerns regarding potential geopolitical crises.
Interestingly, despite these rising concerns, investors appear to be moving away from traditional safe-haven assets. Risk premiums in assets such as gold are starting to fluctuate, suggesting a change in investment strategies in response to increasing geopolitical tensions.
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