According to the survey, fund managers expect ‘7.4 Fed rate hikes’ in 2022, up from earlier expectation of ‘4.4 hikes’ for the year in the previous month’s survey.
“April fund manager survey is bearish as fear of fast & furious Fed sends global growth optimism to all-time low, keeps Wall St stability risks high; though not as bearish as war-shocked March fund manager survey,” the bank said.
“Sentiment is poor; we remain in “sell-the-rally” camp as profit-policy set-up means Jan/Feb sell-off was appetizer not main course of ’22,” it said. Bank of America said its financial market stability risks index is currently at 6.4. “Investors are seeing risk levels comparable to the Covid shock and global financial crisis. The high perceived risk to financial market stability points to a further decline in equity prices,” said the brokerage.
Global recession remains the top tail risk for 26% of the fund managers, according to the survey, followed by hawkish central banks and inflation. Russia-Ukraine conflict has fallen to the fourth spot among tail risks. With the Ukraine war risk fears subsiding, cash levels have gone down to 5.5% from 5.9% in March, the survey showed.
The survey pointed out that the disconnect between global growth and equity allocation remains staggering. Though still at depressed levels, equities are nowhere near recessionary close-your-eyes-and-buy levels, it said.
The survey numbers pointed out that global growth expectations have deteriorated to -63% in March 2020, the weakest since March 2020.
The survey drew parallels to previous instances where expectations on profit have fallen to such low levels, which includes the collapse of Long Term Capital Management, burst of the Dotcom bubble, Lehman bankruptcy and Covid.
Expectation of stagflation have risen to 66% from 62%, the highest level since August 2008, it showed.
