No possibility of V-shaped recovery in global markets: Bank of America survey

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Published: May 20, 2020 12:45:34 AM

According to the survey released on Tuesday, the biggest tail risk for the investors globally was the ‘second wave’ of the novel coronavirus.

The survey further shows that cash levels continue to remain at 5.7%, while this is down from 5.9% earlier, but it is still well above the 10-year average of 4.8%. (Representative image/ File photo)The survey further shows that cash levels continue to remain at 5.7%, while this is down from 5.9% earlier, but it is still well above the 10-year average of 4.8%. (Representative image/ File photo)

Bank of America (BofA) Global Research’s May Fund Manager Survey (FMS) has ruled out the possibility of a V-shaped recovery in the markets globally.

Only 10% of the fund managers who participated in the survey believe that the markets could witness a V-shaped recovery. In contrast, 25% of them believed that there would be a new bull market whereas 75% expected an ‘U’ or W-shaped recovery, while 68% believe that in a bear market rally.

According to the survey released on Tuesday, the biggest tail risk for the investors globally was the ‘second wave’ of the novel coronavirus. Out of the total survey participants, 52% believed that the ‘second wave’ was the biggest tail risk. The breakthrough of a vaccine is likely to be a V-shaped recovery catalyst, according to BofA Global Research. Investors are continuing to have a bearish outlook for risky assets globally. The Bull and Bear indicator by BofA is pinned at zero which means that the investors are still bearish about the markets.

The survey further shows that cash levels continue to remain at 5.7%, while this is down from 5.9% earlier, but it is still well above the 10-year average of 4.8%. Additionally, going ahead 73% of the fund managers agree that corporations should focus on reducing debt, 15% of the interviewed fund managers said corporations should increase capex and only 7% said corporations should buyback stocks and increase dividends.

The most crowded trade according to the survey is US technology and growth stocks. “December 2007 was the last time this many FMS investors expected value stocks to underperform growth stocks,” BofA Global Research said.

All in all, 68% of the fund managers said supply chain reshoring will be the biggest structural shift in the post-Covid world. Around 44% said protectionism and 42% said higher taxation would be the biggest structural shift in the post-Covid world.

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