According to Bank of America Corp.’s monthly survey of fund managers, investors have reduced their exposure to risky assets to levels not seen even during the global financial crisis, in total capitulation amid a „terrible” economic outlook.
Expectations for global growth and profits have fallen to record lows, while recession expectations were the highest since the slowdown caused by the pandemic in May 2020, strategists led by Michael Hartnett write in a note. According to the survey, investors’ holdings in equities have fallen to levels last seen in October 2008, while portfolio balances rose to their highest level since 2001. A net 58% of fund managers said they were taking on lower risks than usual, surpassing the survey’s figures from the global financial crisis.
A Bank of America survey of 259 participants with $722 billion under management in the week to July 15 found that high inflation is currently viewed as the biggest risk, followed by a global recession, central bank hawkishness and systemic events in the credit and banking sector. At the same time, according to the survey, most investors are betting that inflation will be lower next year, which means lower interest rates.
The survey results highlight this year’s flight away from risky assets, which has sent the S&P 500 into bear market territory and the worst six-month decline in European equities since 2008. Sentiment remains subdued and downside risks remain high. The looming energy crisis in Europe has also added uncertainty.