By Vicki Schmelzer
NEW YORK (MaceNews) – Global investor sentiment was “super bearish” in September, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
Accordingly, cash allocation rose to the “biggest overweight on record” and equity allocation fell to a “record underweight,” the survey said.
Investors remained on high alert for recession, with a net 68% looking for a global downturn in the next 12 months. This is up from a net 58% with that view in August and a net 47% with that view in July.
In terms of the global outlook, this month a net 72% of fund managers looked for weaker economic growth in the coming 12 months, compared to a net 67% in August and a net 79% in July, which was an all-time low since record keeping began in 1995.
A net 79% of managers now look for lower global CPI in the coming 12 months, versus a net 80% in August, which was the highest since December 2008. This compared to a net 76% in July.
A net 38% of those polled in September looked for fed funds to peak at 4%-4.25%, compared to the 3.5%-3.75% peak envisioned in August.
Fund managers “continue to think that inflation, as measured by the PCE deflator, needs to slow to below 4% (currently 6.3%) for the Fed to stop hiking or even start contemplating cuts,” the survey said.
In terms of asset allocation, allocation to cash stood at a net 62% overweight, the biggest overweight on record and compared to a net 48% overweight in August and a net 50% overweight in July.
Similarly, average cash balances rose to 6.1% in September versus 5.7% in August and back at August levels, which were the highest since October 2001 in the wake of the 9/11 attacks. The survey continued to stress that cash balances were still “well above the long -term average of 4.8%.”
In September, a net 52% of portfolio managers were underweight global equities, a record underweight. This compared to a net 26% underweight in August and a net 44% underweight in July.
A net 40% of managers were underweight bonds this month, compared to a net 28% underweight in August and a net 31% underweight in July.
Commodity allocation rose to a net 19% overweight in September compared to a net 10% overweight in August and a net 17% overweight in July.
On regional equity asset allocation, global investors decreased holdings across the board.
Allocation to U.S. stocks stood at a net 4% underweight in September, compared to a net 10% overweight in August and a net 5% underweight in July.
This month, a net 2% of managers were underweight eurozone stocks and compared to a net 34% underweight in August and a net 35% underweight in July.
Allocation to global emerging markets (GEM) stood at a net 10% underweight this month compared to a net 9% underweight in August and a net 5% underweight in July.
Allocation to Japanese equities saw a 10% underweight in September compared to a net 6% underweight in August and UK allocation saw a 24% underweight versus a net 15% underweight in August.
In September, the biggest “tail risks” feared by portfolio managers were: “Inflation stays high” (36% of those polled), “Hawkish central banks” (20%), “Geopolitics” (17%), “Global recession” (17%), “Systemic credit event” (7%), and “Covid-19 resurgence” (1%).
Last month, the biggest “tail risks” were: “Inflation stays high” (39% of those polled), “Global recession” (24%), “Hawkish central banks” (16%), “Systemic credit events” (8%), “COVID-19 resurgence” (4%) and “Russia-Ukraine conflict” (3%).
In September, the “most crowded” trades deemed by global managers were: “Long US dollar,” (56% of those polled), “Long oil/commodities” (10%), “Long ESG assets” (8%), “Short US Treasuries” (8%), “Long growth stocks” (7%), and “Long Cash.”
Last month, the “most crowded” trades deemed by global managers were: “Long US dollar” (42% of those polled), “Long oil/commodities” (14%), “ Long Cash” (9%), “Long FAANG stocks” (8%), “Short US Treasuries” (5%) and “Short EM debt” (2%).
An overall total of 240 panelists, with $695 billion in assets under management, participated in the BofA Global Research fund manager survey, taken September 2-8, 2022. “212 participants with $616bn AUM responded to the Global FMS questions and 121 participants with $265bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com
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