Fund managers around the world have their cash positions at a 20-year high amid worries about stagnant inflation and higher interest rates, according to the latest Bank of America fund manager survey. Bank of America also believes that US stocks will have a bear market rebound, but may fall again in the future.
The survey report shows that global fund managers are now “extremely pessimistic”, with fund managers holding as high as 6.1% of their cash positions, the highest since the terrorist attacks in the United States on September 11, 2001, and higher than in April. 5.5%.
Investors’ appetite for cash continues to grow today, as are growing concerns about stagnant inflation. A whopping 77% of fund managers are concerned about stagnant inflation, the highest since August 2008 and well above 66% the previous month, the report showed.
While the latest U.S. inflation data suggest consumer prices may have peaked in April, managers still predict that the Fed will likely keep raising interest rates to cool demand and keep inflation down. In addition, the economy faces the risk of a recession as borrowing costs rise due to sharp interest rate hikes by the authorities.
The survey also showed that the “tail risk” that fund managers were most worried about in May was the hawkish central bank, with a whopping 31% of investors worried about it.
BofA’s Bull & Bear Indicator is currently at 2.0, indicating that the opposite should be bought. However, Michael Hartnett, chief investment strategist at Bank of America, pointed out that investors are still not in a “full capitulation”, so there will be a bear market rally, however, the stock market has not yet reached the final low.
The S&P 500 has lost 14.75% so far this year, in part as high-growth tech stocks have been hit by worries about higher interest rates. Bank of America’s survey also showed that the proportion of fund managers shorting technology stocks hit a new high since August 2006.