Global fund managers continued to stay bearish within the month of May, rising their money ranges to the very best because the 9/11 catastrophe in 2001, Bank of America’s (BofA) Global Fund Manager survey confirmed. On a month-on-month foundation, fund managers have elevated their money place by greater than 5 share factors. Further, hawkish central banks throughout the globe and a worry of world recession are being thought of as the most important ‘tail risk’ forward for international development. Last month too the BofA survey confirmed that international fund managers have been bearish with international development optimism at an all-time low because the survey was began.
Cash ranges at 20-year excessive
The May survey of fund managers confirmed {that a} internet 53% have been bullish on money. This is opposite to what was seen final month the place money ranges have been down to five.5%, from 5.9% within the month of March this 12 months. In May, money ranges rose to six.1%, a 20-year excessive. Rising inflation, quicker than anticipated charge hike cycle and geopolitical worries are weighing in on sentiments.
BofA mentioned that their Financial Market Stability Risks Indicator is at the moment at 7.5, a report excessive. Amid heightened danger, buyers do maintain money in an try to avert danger. Further, development optimism is at an all-time low. “Growth expectations remained weak as net FMS investors expecting a stronger economy fell further to an all-time low (net -72%),” BofA mentioned. Profit expectations additionally fell additional beneath COVID low ranges to internet -66% (from 63%), the weakest since October 2008.
Hawkish central banks a priority
Talking in regards to the greatest tail danger forward, fund managers surveyed by BofA mentioned that hawkish central banks are the most important danger. 31% of the surveyed individuals are involved about central banks whereas 27% see international recession as the most important tail danger and 18% really feel inflation is the most important concern. Only a mere 1% now see covid-19 as a significant danger.
Diving deeper into central banks, the survey mentioned that numerous individuals consider that the US Federal Reserve will hike rates of interest shut to eight occasions on this tightening cycle. Till final month most fund managers have been siding with near 7 charge hikes.
Asset allocation
Overall on equities, fund managers are 13% underweight — highest since May 2020. The development is obvious with extra defensive positions being taken up. “FMS investor positioning turns the most defensive since May 2020 with combined net % overweight in utilities + staples + healthcare at 43%,” BofA mentioned.
The survey confirmed that buyers in May acquired extra defensive, rising allocation to staples, money, and the healthcare sector whereas on the similar time chopping publicity to Technology. In phrases of asset class, money, alternate investments, and commodities are a few of the bullish trades whereas buyers are bearish on equities and bonds.
Source: www.financialexpress.com”