Despite a historic collapse in fund manager sentiment in the past month, the 2008/09 financial crisis saw deeper despair about global growth and equity valuations, according to Bank of America Merrill Lynch’s latest survey of 183 fund managers.
However, the survey shows the biggest drop in global growth expectations since the survey, which is published every month, began in 1994.
Sentiment is close to the bearish extremes of 2008 in terms of cash holdings – which have jumped over the past month from 4% to 5.1% – and is also reflected in feelings about corporate leverage. The 61% of investors who say corporates should improve their balance sheets is the highest level since 2009 and a record number say company debt is too high.
The bank said its ‘Bull & Bear Indicator’ at 1.7 triggered a “tactical contrarian buy signal for risk assets – but warned that the signal could be too early given there is an “exogenous 2SD event at play”. The indicator gave a buy signal in July 2008 – two months before Lehman Brothers collapsed.
A sustained rally requires further macro and market policy moves, plus the belief that the virus is peaking in Europe and US, the bank said.
The survey was published March 17.
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