Fund managers most bearish on growth since Global Financial Crisis
The confidence that professional investors have in the health of the global economy has plummeted to its lowest level since the Global Financial Crisis (GFC), the latest Bank of America Global Fund Manager survey has found.
The closely-watched survey found that the growth expectations of fund managers across the world fell to a 14-year low, after Russia launched an invasion of Ukraine and sparked massive economic sanctions from the international community.
The confidence that professional investors have in the health of the global economy has plummeted to its lowest level since the Global Financial Crisis (GFC), the latest Bank of America Global Fund Manager survey has found.
A net 64% of investors think the global economy will be weaker in 12 months’ time, which was the worst reading since July 2008 – the peak of the GFC. In February, a balance of just 20% were expecting a weaker economy.
Some 62% of managers were now forecasting a period of stagflation for the global economy, characterised by below-trend growth and above-trend inflation. Only 35% anticipated ‘boom’ conditions of above-trend growth and inflation.
The cause of this pessimism was Russia’s invasion of Ukraine. This was cited by 44% of the survey’s respondents as being the biggest tail risk in the market at present, followed by global recession and inflation.
Fund managers had sold down their equity allocations in recent weeks – but BofA’s strategists added that these “have not dropped to capitulation levels normally seen in a recession”. A net 4% of managers are currently overweight equities, which is down 27 percentage points from last month and the lowest since May 2020, towards the start of the COVID-19 pandemic.
At the same time, they have been adding to cash (a balance of 46% of fund managers are overweight cash) and the allocation to commodities has reached its highest-ever net overweight at 33%. Russia is an exporter of many commodities and sanctions will add to ongoing supply bottlenecks.
In terms of their positioning relative to history, fund managers are now overweight commodities, cash and consumer staples. The biggest underweights are to assets most vulnerable to the Russia-Ukraine conflict, such as Europe, emerging markets and equities in general.
The nervousness around the global outlook and its effect on the stock market meant that 60% of fund managers expected an equity bear market (defined as a fall of more than 20%) in 2022. This was a jump from just 30% last month.
And when asked which assets they expected to produce the best returns this year, 48% of fund managers chose oil. The price of oil had surged since the start of the conflict, reflecting Russia’s status as a major exporter of this key commodity and the sanctions that had been levied on the country.
The March edition of the Bank of America Global Fund Manager Survey polled 299 fund managers running a total of $1trn between 4 and 10 March.
AUTHOR
Gary Jackson
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