Global fund managers remain pessimistic on growth, cut equity holdings even further, now lowest since Lehman

Global fund managers are pessimistic about economic growth and corporate profits, slashing equity allocation to a new low since the Lehman crisis, while raising cash levels, Bank of America’s fund manager survey showed.

Global fund managers remain pessimistic on growth, cut equity holdings even further, now lowest since Lehman
Bears have been in control of global stock markets so far this year where the Dow Jones has fallen 13%. Sensex and Nifty are down around 6% each

Global fund managers are pessimistic about economic growth and corporate profits, slashing equity allocation to a new low since the Lehman crisis, while raising cash levels, Bank of America’s fund manager survey showed. “July BofA Fund Manager Survey (FMS) shows a dire level of investor pessimism… expectations for global growth & profits all-time lows, cash levels highest since “9/11”, equity allocation lowest since Lehman (crisis),” BofA said. Bears have been in control of global stock markets so far this year where the Dow Jones has fallen 13%. Sensex and Nifty are down around 6% each.

Equity exposure down, cash levels up

“FMS equity allocation fell 29ppt MoM to net 44% underweight this month, the most underweight since October 2008,” the report said. Last month, BofA survey showed that a net 15% of the respondents were underweight on equities. Further, the recent survey showed that cash levels are back up at 6.1%, up from 5.6% last month. The elevated cash levels are the highest since October 2001. Comparing allocation to equities against cash, the same is the lowest since October 2008.

The monthly survey by Bank of America took views from a total of 259 respondents ranging from chief investment officers, economics, asset strategists, portfolio managers, and asset allocators. The respondents hold $722 billion in assets. A net 50% of the survey respondents want companies to strengthen their balance sheets and not increase spending on capex or return cash to shareholders. Also Read

Taking no risks

Standing testament to growing pessimism among investors, the survey showed that a net 58% of FMS respondents say they are taking lower than normal risk levels. This is a new level of dismay among investors even surpassing GFC/Lehman levels. In terms of regions, fund managers are bearish on all regions for equities, including the UK, US, Emerging Markets, Japan, and Eurozone. The most bearish outlook is for Eurozone Equities. Consequently, 50% of the survey participants said they are overweight cash in their portfolio.

Among equities, the survey showed a 3ppt increase to 5% underweight, while eurozone equity allocation decreased 23ppt MoM to net 35% underweight, the lowest since June 2012. Cash remains king in portfolios among respondents of BofA’s monthly survey. Positive positioning is also seen in defensives such as healthcare and staples. The biggest tail risk seen by fund managers is inflation coupled with hawkish global central banks. In line with this, survey participants expect the US Federal Reserve to hike interest rates by close to 150 basis points more in this rate hike cycle.

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