Fund managers get more skittish of stocks in March, BofA-ML survey finds

Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC. Photo taken July 2018.Sculpture by Jimmie Durham, titled ‘Still Life with Spirit and Xitle,’ made of car, volcanic stone and acrylic paint at the Hirshorn museum in Washington, DC.

Global fund managers turned even more skittish on equities in March, but were a bit less bearish about the economic outlook, according to a Bank of America-Merrill Lynch survey.

Equity allocation fell 3 percentage points on-month to just 3 percent overweight in March, the lowest level since September 2016, and a sharp drop from 31 percent overweight in November 2018, the survey found, adding that was despite global stocks rising around 12 percent so far this year.

That was despite the allocation to cash falling 4 percentage points to a net 40 percent overweight, after February’s level was the highest overweight since January 2009, during the Global Financial Crisis, the survey showed. It’s still well above the long term average of 20 percent, it said.

The funds didn’t flow into bonds: Allocations there slipped 1 percentage point to a net 37 percent underweight, just a tad below December’s 35 percent, which was the highest allocation since the Brexit vote in June 2016, BofA-ML said.

Real-estate may have seen some of the largess: allocations to the segment rose 5 percentage points to 6 percent overweight, well above the long-term average, the survey found.

Indeed, the data showed investors have gone long on defensive assets that perform well when interest rates fall, and short on cyclical assets which perform well when rates rise. The survey showed 38 percent of investors think the U.S. Federal Reserve rate hiking cycle is done, while 53 percent expect short-term interest rates will be unchanged or lower over the next 12 months.

Bond yield forecasts are the lowest since July 2012, BofA-ML said.

Despite some gloom on equities, fund managers turned less bearish on the corporate and economic outlook.

“Global growth and profit expectations rebounded strongly for the second month in a row despite continued weakness in global survey data and falling consensus global profit expectations,” BofA-ML said.

A net 25 percent of fund managers surveyed expect global growth to weaken over the next 12 months, but that’s a big, 22 percentage point improvement on-month and well off January’s low of 60 percent, which was in line with the 2001-01 and 2008-09 recessions, BofA-ML said.

Global profit expectations also improved somewhat, with only a net 28 percent expecting deterioration, up 14 percentage points from February and 24 points from January, which was the worst since December 2008, the data showed. But it was still a sharp reversal from January 2018, when 44 percent said they expected profits would improve, BofA-ML said.

The survey was conducted over 8-14 March, with 186 panelists with US$557 billion in assets under management responding to the global fund manager questions, BofA-ML said.

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