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Global fund managers turned more defensive in Reuters March survey

FILE PHOTO: A statue depicting a bull and bear fight that had for decades adorned an exclusive Wall Street club is on display at the newly opened Museum of American Finance in New York
FILE PHOTO: A statue depicting a bull and bear fight that had graced an exclusive Wall Street club for decades is on display January 9, 2008 at the newly opened Museum of American Finance in New York. REUTERS/Lucas Jackson (UNITED STATES)

March 31, 2022

By Tushar Goenka

BENGALURU (Reuters) – Global fund managers maintained their cautious stance in March, increasing recommended bond holdings and cash reserves and proposing reduced equity exposure, a Reuters poll has revealed.

The March 21-31 survey captured this defensive strategy pursued by many fund managers following the outbreak of the Russia-Ukraine war. The February poll was partly conducted before the invasion of Russia on February 24, but still hinted at caution.

The recommended equity allocation was reduced to an average of 48.5% of the global model portfolio of 35 fund managers and chief investment officers in the United States, Europe and Japan, the lowest level since late 2020. In February it was 49.5%.

Equity markets suffered amid speculation that the US Federal Reserve would hike interest rates more aggressively than previously thought.

But the S&P 500 has bounced back quickly, up 11% since March 8, its biggest 15-day percentage gain since June 2020, when the market recovered from a sharp sell-off just before the start of the COVID-19 pandemic.

Over the past month, wealth managers increased their liquidity buffer to 4.5% from 4.2%, the highest level since November 2020.

“In our view, markets are on the verge of pricing our key scenario, in which the Federal Reserve continues its tightening cycle and in turn cuts inflation without causing a significant slowdown in growth,” said Craig Hoyda, senior quantitative analyst at ardn.

“However, we see the risks on the downside, with a 20% to 30% risk of a global recession within the next two years.”

The US 2-year to 10-year Treasury spread showed signs of recession on Tuesday, briefly reversing before turning positive again.

This reversal, if sustained, has previously been an accurate indicator of a recession.

Not all fund managers were so cautious, especially as inflation soared to multi-year highs in almost every major economy.

“In an inflationary environment, equities are the only large and liquid asset class that is accessible to all and capable of generating significant real returns,” said Christopher Rossbach, chief investment officer at J. Stern & Co.

(Reporting and survey by Tushar Goenka, Arsh Mogre in BENGALURU and Fumika Inoue in TOKYO; Editing by Barbara Lewis)

https://www.oann.com/global-fund-managers-turned-more-defensive-in-march-reuters-poll/?utm_source=rss&utm_medium=rss&utm_campaign=global-fund-managers-turned-more-defensive-in-march-reuters-poll Global fund managers turned more defensive in Reuters March survey

DUSTIN JONES

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