Global corporate profits are expected to accelerate over the next 12-months for the first time since August, 2018, and the trade war resolution will trigger a full capex cycle taking the global PMIs back to prior highs, according to a BofA Global Fund Manager Survey issued on Wednesday.

The profit jump is the biggest two month rise since May 2009 and points to an inflection in global PMIs towards 55 over the next six months, the survey said.

The survey was carried out between December 6 and December 12 and covered 247 fund managers with an aggregate of US$745 billion in assets under management.

The December survey confirmed the bullish sentiment for equities with a preference for stocks over bonds, rest of the world over the United States in terms of markets and cyclicals over defensive sectors.

An agreement over a phase one deal has ignited hopes the 18-month long trade war between the world’s two largest economies will cease with the survey expecting a rebound in growth. A net 29% of those surveyed expect global growth to improve in the next 12-months, a big reversal from -50% in June 2019.

The trade war was cited as the main reason for the IMF’s expectations that the global economy would expand 3.2% in 2019, down from 3.6% in 2018 and from the 3.3% expansion it forecast for this year back in April.

The trade war has hurt investment sentiment across the corporate landscape and 66% of those surveyed said companies had under-invested in their business. This is the highest since June 2017.

This improved growth outlook would stoke pricing pressures with the survey’s inflation expectations rising to a 13-month high and a net 55% expecting a steeper yield curve. It expects the US 10-year Treasury to rise another 84 basis points to 2.71% before causing losses and volatility in risk assets. It sees the S&P 500 peaking at 3,322, a rise of 4% from current levels.

Those surveyed bought equities (rest of the world markets), commodities and banks and energy shares. They sold bonds, real estate, US equities and utilities and staples shares.

Trade war was the top “tail risk,” followed by an unexpected outcome in the 2020 election and the bond bubble popping.