Investors dump stocks and flee to cash as growth outlook is weakest since 2008 – BoFA

Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc pictured in Warsaw
Arrangement of various world currencies including the Chinese yuan, Japanese yen, US dollar, euro, British pound and Swiss franc are pictured in Warsaw January 26, 2011. REUTERS/Kacper Pempel/Files

March 15, 2022

LONDON (Reuters) – Investors are more concerned about the prospects for global growth than at any time since the financial crisis in 2008, and they have increased their cash holdings to a two-year high, according to a monthly BofA fund manager survey.

The majority of investors surveyed between March 4th and 10th, who manage approximately $1 trillion in assets, now expect a stock bear market in 2022, and allocations to global equities have fallen to their lowest levels since May 2020 .

Investor cash holdings rose to nearly 6%, while allocations to commodities surged to a record 33%. Hedge funds’ net exposure to equity markets is at its lowest level since April 2020, according to the survey.

The most crowded trade is long oil/commodities, the US investment bank said in the note, with long technology stocks and long ESG ranking second and third. Almost half of the investors surveyed expect oil to deliver the best returns in 2022.

The European edition of the monthly Fund Managers’ Survey made for gloomy reading as investors downgraded their growth outlook for Europe in response to the Russian invasion of Ukraine.

A net 69% of respondents expect the European economy to weaken in the coming year, the highest proportion since 2011. The 81 percentage point divergence from February’s net 12% who still expected growth marks the largest monthly decline since the BoFA records began in 1994.

In response to the deteriorating growth outlook, around 61% of investors believe the European market has peaked this cycle, up from 22% in the previous edition of the survey.

Investors have also slightly raised their expectations for the number of US Federal Reserve rate hikes in 2022, despite liquidity conditions deteriorating in financial markets to their lowest levels since the coronavirus pandemic in March and April 2020.

“This is notable because historically, central banks have been much less inclined to hike rates when liquidity conditions are very poor,” BofA said.

Net 44% of European investors expect European inflation to rise over the next 12 months, while 38% expected inflation to fall last month. Globally, a net 5% of investors believe global inflation will fall after a 13-year high of 56% last month, BoFA said.

(Reporting by Saikat Chatterjee; Editing by Tommy Wilkes, Kirsten Donovan) Investors dump stocks and flee to cash as growth outlook is weakest since 2008 – BoFA


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