by News | Sep 15, 2022 | News | 0 comments
Investors are fleeing equities en masse amid the specter of a recession, with allocations to stocks at record lows and cash exposure at all-time highs, a Bank of America Corp. survey showed.
A historically high 52% of respondents said they are underweight equities, while 62% are overweight cash, according to the bank’s global fund manager survey, which included 212 participants with $616 billion under management in the week through
As concerns over the economy escalate the number of investors expecting a recession has reached the highest since May 2020, strategists led by Michael Hartnett wrote in a note on Tuesday. Sentiment is “super bearish,” with the energy crisis further weighing on risk appetite, they said. A net 42% of global investors are underweight European equities, the largest such position on record.
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The survey showed the market’s grim mood even before Tuesday’s report on US inflation, which ran hotter than estimates in August and cemented traders’ bets on a 75 basis-point rate hike by the Federal Reserve next week. US stock futures fell on the news with contracts on the S&P 500 dropping by more than 2%.
Global stocks have had a roller-coaster ride in the past few months. Declines have been driven by fears that central banks will remain hawkish for longer and tip the economy into a recession, while rallies have been fueled by low investor positioning and optimism around peaking US inflation.
Strategists at top banks including Deutsche Bank AG and Chase & Co. say bleak investor sentiment — often a contrarian indicator for a stock rally — is likely to drive equities higher into the year-end.
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Hartnett sees the extent of depressed sentiment and better-than-feared macroeconomic data boosting the S&P 500 to 4,300 points — nearly 5% above current levels. But he expects the index to fall back from that level, and remains “fundamentally and patiently bearish.”
The outlook for corporate earnings is also deteriorating. A net 92% of participants in the Bank of America survey now expect profits to decline in the next year, while the number of investors taking higher-than-normal risk has fallen to a record low.