Bank of America's (NYSE:BAC) traditional Fund Manager Survey (FMS) has yielded some of the most bearish results recently with global growth optimism at an all-time low (-71%) while most since August 2008 predict stagflation.
The April edition of the survey shows investors are expecting 7 rate hikes from the Fed with the tightening cycle expected to end in the first half of 2023.
Similarly, the risk of a monetary policy mistake is at an all-time high (83%). The FMS also showed that surveyed investors see the Fed “put” at 3637 on S&P 500.
“April FMS 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 FMS, sentiment is poor (BofA Bull & Bear Indicator back down to 2.0 “buy signal”); we remain in “sell-the-rally” camp as Profit-Policy set-up means Jan/Feb sell-off was appetizer, not main course of ’22,” Bank of America’s Chief Investment Strategist Michael Hartnett wrote.
Investors also named 4 key tail risks at the moment: 1) recession, 2) Hawkish central banks, 3) Inflation, and 4) Russia/Ukraine war.
Elsewhere, the survey showed that long oil/commodities is the most crowded trade at the moment with allocation to commodities at 38%.
“Modest April rotation to banks & tech, but biggest “longs” are cash, commodities, resources, healthcare, biggest “shorts” are bonds & cyclicals such as industrials & discretionary,” Hartnett added.
Hartnett’s fellow BofA strategist Jill Carey Hall reflected on last week’s flows when the S&P 500 closed 1.3% lower. Overall, the bank’s clients were net sellers of US stocks ($2.8 billion).
“All three client groups were sellers, led by hedge funds (sixth consecutive week of sales). Institutional clients were net sellers for a second week, and retail clients were net sellers after two weeks of buying (and for only the second time YTD),” Carey Hall said in a separate memo to clients.
Clients were selling large caps and buying small and mid caps. As far as stock buybacks are concerned, corporate clients moderately accelerated activities on this front.
By Senad Karaahmetovic