(Bloomberg) — Investors are piling into cash as global growth optimism sinks to an all-time low and stagflation worries rise, according to Bank of America Corp.’s latest fund manager survey.
Cash levels among investors hit the highest level since September 2001, the May survey showed, while stagflation fears were at their highest since August 2008. Hawkish central banks are seen as the biggest tail risk by investors, followed by a global recession, BofA strategists said, after surveying 288 panelists with $872 billion in assets under management during the second week of May.
The results come after the longest weekly losing streak for the world’s stocks since the global financial crisis as central banks turn off the monetary taps at a time of stubbornly high inflation. While equities have seen a small rebound since Friday as valuations get more attractive, strategists including Michael Wilson at Morgan Stanley say more losses lie ahead.
BofA’s Michael Hartnett also said investors believe stocks are prone to an imminent bear market rally, but ultimate lows have not yet been reached. Fears of a recession were followed by the risks from inflation and the war in Ukraine, the survey showed. The bearishness has been extreme enough to trigger BofA’s own buy signal, a contrarian indicator for detecting entry points into equities.
The survey also showed the biggest “short” in technology stocks since August 2006. Frothy tech shares have been particularly punished in the latest selloff amid concerns about future earnings as rates rise.
Overall, investors are very long cash, commodities, healthcare and consumer staples, while being very short technology, equities, Europe and emerging markets, the survey showed.
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