Investors are becoming increasingly concerned about global growth with optimism at an all-time low, as they increase their cash holdings to the highest level in two decades, according to BoFA Securities monthly fund manager survey.
The investors, who manage just under $1 trillion in assets, are now the most underweight equities since May 2020 at net 13% underweight, from 6% overweight in the April survey.
Growth expectations remain weak, BofA said, with optimism about the economic outlook falling to a record low in its survey history, the U.S. investment bank said.
Hawkish central banks (31%) and global recession (27%) are considered to be the two biggest tail risks among investors, with inflation (18%) and war fears (10%) receding.
Cash levels among investors rose to 6.1% from 5.5% in the previous edition of the survey. Commodities, healthcare, consumer staples were the top picks while technology, Europe and emerging markets were shunned.
The May fund manager survey is “extremely bearish”, BofA said, but still missing the “full capitulation” piece as investors continue to expect rate hikes rather than cuts.
In fact, investors increased their view for the number of rate hikes from the Fed this tightening cycle, and now expect 7.9 hikes, up from 7.4 in April.
The top crowded trade remains long oil/commodities, BofA said in the note.
(Reporting by Samuel Indyk; Editing by Saikat Chatterjee and Aliosn Williams)