Fund managers are begging for someone — anyone — to increase investment spending.
That's the primary takeaway from Bank of America Merrill Lynch's monthly survey of money managers.
A net 48 percent of investors surveyed thought fiscal policy was too tight around the world (that's a record proportion who espouse that view), while 56 percent said they wanted companies to boost capital spending — a rise of 10 percentage points over the past four months.
A net 69 percent of those surveyed say that businesses aren't investing enough, which is close to the record level for this survey.
The increased preference for investment spending comes as market participants aren't rewarding companies that elect to buy back their own stock with the same fervor they used to. Fund managers join a growing chorus of noteworthy economists who have pushed for more expansionary fiscal policy in the face of a slow growth, low rate environment, praising governments in Canada and Japan that have pursued such a course of action.
A dearth of investment is the proximate cause for the abysmal trend in U.S. productivity. Meanwhile, there are warning signs (most notably Delta's computer outage fiasco) that a failure to invest can wreak havoc with a company's operations, and in turn, its financial performance.
Analysts are highlighting the need to keep conditions for business investment in a favorable setting as a key consideration for the Federal Reserve as it seeks to normalize policy.
However, the same investors surveyed by Bank of America might have to be careful what they wish for, as most aren't positioned for wage growth that would feed into higher inflation and make investing in capital more attractive on a relative basis.
Central banks have created a "safe space" for investors by keeping rates low and stable, spawning a wave of "fresh optimism" but also a continued preference toward assets that benefit from deflation rather than inflation, concluded Chief Investment Strategist Michael Hartnett.