Global and European investor confidence is at its most bearish since the global financial crisis, amidst market pessimism driven by concerns over trade wars, recession, and monetary policy.
Cash allocations soared to 5.6% from 4.6% in June, marking the biggest jump since the US debt ceiling crisis eight years ago. Risk allocation, meanwhile, is at cycle low according to the Bank of America Merrill Lynch’s (BofAML) latest fund manager survey.
High quality and low risk stocks are most favoured among fund managers who took part in the report. Over 60% of investors believe high quality stocks will outperform.
Italian stocks are the least favoured among investors – around 40% would under-weigh them – whilst in terms of sector, retail sees the highest underweight at net 45%.
Investors are staying hedged for a sharp fall in equities as June sees the second largest drop in equity allocation ever – the largest occurred in August 2011. Relative allocation of equities instead of bonds fell to its lowest since May 2009.
Long US treasuries have become crowded against the backdrop of an “overvalued” dollar – at its highest since 2002.
As recession views surge, around 30% of investors in Europe surveyed expect earnings to drop, while 27% believe the European economy is headed for a recession.
The last fund manager survey found that 14% of respondents expected to see European growth improve over the following 12 months.
Overall, more than 70% of investors foresee below trend growth and inflation over the coming year.
©2019 funds europe
