Global fund managers cut exposure to tech shares, buy more healthcare stocks, increase cash levels

Global fund managers have trimmed their exposure to technology stocks in December while buying more healthcare stocks, Bank of America’s Global Fund Managers survey for December showed.

Tesla, NASDAQ
In the last one month, the tech-heavy NASDAQ index has fallen nearly 3% with shares of companies such as Tesla, Twitter, and Netflix all down more than 10%. (Image: REUTERS)

Global fund managers have trimmed their exposure to technology stocks in December while buying more healthcare stocks, Bank of America’s Global Fund Managers survey for December showed. Fund managers have cut their investments in the technology sector by nearly 10 percentage points while adding more healthcare stocks and also increasing their cash positions to the highest since May 2020. In the last one month, the tech-heavy NASDAQ index has fallen nearly 3% with shares of companies such as Tesla, Twitter, and Netflix all down more than 10% during the same time period. Shares of Apple, Amazon, and Google are also down with losses.

Rising pessimism for tech stocks, Cash allocation up

“In December, FMS investors rotated out of cyclicals as inflation concerns fell and poured into defensives on hawkish central banks,” BofA’s survey showed. According to BofA, there was rising pessimism among investors for technology stocks while optimism was rising when it came to the pharmaceutical sector. Major stocks related to the pharmaceutical industry such as UnitedHealth Group and Vertex Pharmaceuticals, have rallied more than 10% each.

Meanwhile, fund managers have increased their allocation to cash in the month of December, now standing at 5.1%. “In December, FMS investors rotated out of cyclicals as inflation concerns fell and poured into defensives on hawkish central banks,” BofA said. This is the highest level of cash observed with fund managers since May of 2020. “FMS cash allocation increased 14ppt on-moth to net 36% overweight, largest since May’20,” they added.

Still favouring equities

Investors continue to remain bullish on equities as an asset class while bonds are the most bearish trade, FMS showed. Net 46% of the survey respondents were bullish on equities followed by more than 35% saying they are overweight cash and 19% in commodities. 63% said they are bearish when it comes to investing in bonds. “Investors are very long equities, particular the EU and the US, as well as healthcare, banks & tech while they shun bonds, defensives (utilities, staples), and EM,” BofA said.

Hawkish central banks a tail risk

When asked what they believe is the biggest tail risk ahead, fund managers have highlighted they fear hawkish central bank rate hikes. Around 42% of the respondent believe hawkish rate hikes are the biggest risks, followed by 22% saying inflation is a risk. Earlier for the last six fund manager surveys, inflation had taken the center stage as the biggest tail risk. 

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