Expectations of global growth and corporate profits have plunged to a record low, according to a monthly BofA fund manager survey with cash levels rising to their highest in more than two decades as investors cut their exposure to risky assets.
Conducted from 8-15 July among nearly 300 investors overseeing $800 billion in assets under management, the survey revealed a "dire level of investor pessimism" surpassing the depths of the Covid-19 pandemic and the global financial crisis in 2008.
Investors have raised their cash levels to more than 6%, the highest since October, 2001 while equity allocations have slumped to levels last seen when Lehman Brothers collapsed in 2008.
Fears of a recession have ramped up to levels last seen in May, 2020 while investor sentiment remains at maximum "bearishness", the US investment bank said.
While three-quarters of fund managers surveyed expect inflation to fall in the next 12 months, the backdrop remains "stagflationary" with high inflation and slowing growth underpinning sentiment.
Long US dollars was the No. 1 crowded trade in July followed by long oil/commodities and long ESG Assets.
The prospect of inflation staying high was the top tail risk for global markets followed by a global recession. The Russia-Ukraine conflict has dropped to No. 5.
Half of investors surveyed want companies to shore up their balance sheets while less than a third would like to see more capital spending.