As first quarter earnings season wraps up, it is starting to seem like a distinct phase of this recovery is coming to a close.
Namely, the most optimistic days about economic growth, corporate earnings, and how willing investors should be to capture the gains from these trends appear to be passing us by.
In its latest global fund managers' survey, strategists at Bank of America Global Research find that several indicators of the economic cycle pulled back in April after rising sharply through the spring.
And while all of these measures are still high by historical standards, against the backdrop of strategists calling for economic growth to peak and earnings multiples to contract, the signs are starting to add up that we're shifting into a new gear in this recovery. A gear in which fewer people are certain than just about everything is going to get better from here.
The first chart of BofA's note that stood out that the net percentage of investors expecting a stronger economy in the next 12 months fell to 84% in May from 90% last month. The net percentage is the difference between those who think the economy will be stronger and those who think the economy will be weaker in a year.
And though this measure is still clearly elevated by historical standards, what this data shows is another change in the expected rate of change in the economy. Growth is expected to continue, yes, but likely at a slower pace than today.
On the matter of corporate profits, BofA's respondents see the situation similarly to the broader economy with a net 78% of respondents expecting global growth in profits over the next year. But like growth expectations, this too is down 6 percentage points from the prior month's reading of 84%.
Take these readings together and we can see why the survey also shows investors pulling back from taking abnormally high levels of risk in their portfolios after risk appetite hit a record high in February's fund managers' survey.
Look at the chart of the Nasdaq (^IXIC) or Bitcoin (BTC-USD) and it's plain to see that enthusiasm in the largest, most liquid risk-on assets has waned some over those last three months. And the outstanding question now is what can change that dynamic once again.
This article originally appeared on Yahoo! Finance.
