BofA Survey Shows Full Investor Capitulation Amid Dire Pessimism - Bloomberg 2022/7/19 下午10:13

Markets

BofA Survey Shows Full Investor

Capitulation Amid Pessimism
Global growth optimism at all-time low: fund manager survey
BofA says inflation seen falling but mood still stagflationary

By Sagarika Jaisinghani and Michael Msika

2022年7⽉19⽇ GMT+8 下午4:42 Updated on 2022年7⽉19⽇ GMT+8 下午9:41

Investors slashed their exposure to risk assets to levels not seen even during
the global financial crisis in a sign of full capitulation amid a “dire” economic
outlook, according to Bank of America Corp.’s monthly fund manager survey.

Global growth and profit expectations sank to an all-time low, while

recession expectations were at their highest since the pandemic-fueled
slowdown in May 2020, strategists led by Michael Hartnett wrote in the note.
Investor allocation to stocks plunged to levels last seen in October 2008
while exposure to cash surged to the highest since 2001, according to the
survey. A net 58% of fund managers said they’re taking lower than normal
risks, a record that surpassed the survey’s global financial crisis levels.

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Source: Bloomberg

Bank of America’s survey, which included 259 participants with $722 billion
under management in the week through July 15, said high inflation is now
seen as the biggest tail risk, followed by a global recession, hawkish central
banks and systemic credit events. At the same time, the most investors since
the global financial crisis are betting that inflation will be lower in the next
year, which means lower interest rates, according to the poll.

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The survey’s findings highlight this year’s flight from risk assets, which has
sent the S&P 500 Index into a bear market and led European stocks to their
worst six-month drop since 2008. Although optimism is brewing again that

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US inflation could be nearing a peak, sentiment remains subdued with risks

around a potential economic contraction remaining high. A looming energy
crisis in Europe has also added to the uncertainty.

Source: Bloomberg

Bank of America strategists said their custom bull & bear indicator remains
“max bearish,” which could be a contrarian signal for a short-term rally.

“Second half 2022 fundamentals are poor but sentiment says stocks/credit
rally in coming weeks,” strategists wrote.

US stocks have been trying to rebound in July after the S&P 500’s worst first-
half since 1970. Credit Suisse strategists said in a note investors are
expecting a Federal Reserve pivot in the fourth quarter and are beginning to
move into growth stocks and looking into cheap cyclicals like autos.

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The S&P 500 rose 1.2% by 9:35 a.m. in New York, while the tech-heavy
Nasdaq 100 advanced 1%. Lower volumes after the selloff this year have left
the market prone to quick swings, with one measure showing the S&P 500 is
on course for its most volatile year since the global financial crisis.

Other survey highlights include:

Investors are very long cash and defensives like staples, utilities, health
care, and very short stocks, particularly EU, banks, tech and consumer,
while they have also cut exposure to resources

Most crowded trades are long US dollar, long oil and commodities, long
ESG assets, long cash and short US Treasuries

Among equity regions, investors are most bearish on Eurozone and Japan

Investors are most bullish cash and most bearish on equities

In past 4 weeks, investors increased their exposure to bonds, staples,

utilities, healthcare, while slashing exposure to equities, Eurozone,
materials and banks
(Adds note from Credit Suisse strategists, updates market market prices starting
in seventh paragraph)

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