— Highest Cash Levels since 9/11
— Biggest Tech Short since August 2006
By Vicki Schmelzer
NEW YORK (MaceNews) – Global investors loaded up on cash and shunned the tech sector in May as extreme bearishness permeated market sentiment, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
Average cash balances rose to 6.1% in May, the highest cash balances since after the 9/11 attacks, up from 5.5% in April and compared to 5.9% in March.
“Investors are very long cash, commodities, healthcare, staples, and very short tech, equities, Europe, EM,” the survey said, noting that tech allocation was the lowest since August 2006.
Allocation to cash rose to a net 53% overweight in May, the highest since April 2020 and compared to a net 47% overweight in April and a net 46% overweight in March.
In terms of the global outlook, a net 72% of fund managers looked for weaker economic growth in the coming 12 months, another record since the question first appeared in 1995. This compared to a net 71% and a net 64% looking for weaker growth in April and March.
More notably, a net 77% of those polled voiced concern about “stagflation” in May, the highest level since August 2008 and compared to a net 66% in April.
Investor inflation concern moderated, with a net 68% of managers now looking for lower global CPI in the coming 12 months, the highest level since December 2008. This compared to a net 40% in April and a net 5% in March.
This month, asset allocation showed outflows from equities, mild interest in bonds and profit-taking in commodities.
In May, a net 13% of portfolio managers were underweight global equities, compared to a net 6% overweight in April and a net 4% overweight in March.
A net 65% of managers were underweight bonds, versus a net 68% in April and a net 56% in March.
After posting a record 38% overweight in April, global investor allocation to commodities fell to a net 29% overweight in May.
On regional equity asset allocation, global investors made a beeline out of all areas.
Allocation to U.S. stocks fell to a net 6% underweight this month, compared to a net 14% overweight in April and a net 12% overweight in March.
In May, investors saw the so-called “Fed-put” for the S&P 500 at 3,529, or 12% below Monday’s S&P 500 close of 4,008.01. In April, the “Fed-put” level was 3,637.
Under this “Fed-put” notion, the Federal Reserve would purportedly take policy easing action to prevent further stock losses if this downside support was broken.
In terms of the U.S. Federal Reserve raising interest rates, global investors on average now expect 7.9 Fed rate hikes in 2022. Last month, investors penciled in 7.4 Fed rate hikes.
This month, a net 26% of managers were underweight eurozone stocks, compared to a net 17% underweight in April and a net 18% underweight in March.
Allocation to Japanese equities stood at a net 12% underweight in May, compared to a net 2% underweight in April, while UK equity allocation stood at a net 8% underweight compared to a net 7% underweight in April.
In May, the biggest “tail risks” feared by portfolio managers were: “Hawkish central banks” (31% of those polled), “Global recession” (27%), “Inflation” (18%), “Russia-Ukraine conflict” (10%), “A systemic credit event” (7%), “COVID-19” (1%) and “Asia FX war” (1%)
Last month, the biggest “tail risks” were: “Global recession” (26% of those polled), “Hawkish central banks” (25%), “Inflation” (21%), “Russia-Ukraine conflict” (16%), “Asset bubbles pop” (7%) and “COVID-19” (1%).
In May, the “most crowded” trades deemed by global managers were: Long Oil/Commodities” (28% of those polled), “Short U.S. Treasuries” (25%), “Long Tech Stocks” (14%), “Long bitcoin” (8%), “Long ESG” (7%), “Short China stocks” (7%), and “Long Cash” (4%).
Last month, the “most crowded” trades were: “Long Oil/Commodities” (34% of those polled), “Short U.S. Treasuries” (18%), “Long Tech Stocks” (16%), “Long ESG” (11%), Short China” (8%) and “Long Bitcoin” (7%).
An overall total of 331 panelists, with $986 billion in assets under management, participated in the BofA Global Research fund manager survey, taken May 6-12, 2022. “288 participants with $872bn AUM responded to the Global FMS questions and 164 participants with $370bn AUM responded to the Regional FMS questions,” BofA Global said.
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Contact this reporter: vicki@macenews.com
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