Cash Levels Highest Since 9/11 As Investors Abandon Stocks, Short Tech

“Extremely bearish.”

That’s how BofA’s Michael Hartnett described the May vintage of the bank’s Global Fund Manager survey.

The poll, released on Tuesday, was a compendium of gloom — a digest of despair.

Fear, or caution at least, is pervasive. Cash allocations rose six points from April to a 53% Overweight, the highest since April of 2020 and very nearly the highest in two decades. The current allocation is two standard deviations above the long-term average (figure on the left, below).

At the same time, average cash levels were the highest since 9/11 (figure on the right).

Meanwhile, equity allocations plunged 19ppt MoM. Respondents were a net 13% Underweight. That’s rare (figure below).

For months, stock allocations stubbornly refused to catch down to deteriorating growth expectations and the generalized sense of angst that permeated markets. May was the Wile E. Coyote moment.

Just as the cash allocation was two standard deviations above the long-term average, the equity allocation was nearly two standard deviations below typical levels.

Risk appetite was the most subdued since Lehman. A net 49% of respondents said they were taking lower-than-normal levels of risk.

Notably, tech’s multi-trillion dollar Icarus moment — initiated by rising rates, exemplified by Cathie Wood and perpetuated by Netflix’s stunning projection for two million lost subscribers, Amazon’s single-digit top line growth and Apple’s supply chain warning — has shaken investors’ faith in the legacy long.

“[The] May FMS also saw a big flip from the consistent net Overweight tech position of the last 14 years as investors became extremely bearish,” BofA’s Hartnett remarked.

The FMS tech allocation plunged an astounding 23ppt MoM to net 12% Underweight.

With the exception of the dot-com bust, investors have almost never been “short” tech (the scare quotes indicate that the survey is anecdotal). As the figure (above) shows, the implied net Underweight is the largest in almost 16 years.

That’s a manifestation of the “doomsday momentum machine” unwind.

Hartnett reiterated a familiar talking point. “Stocks are prone to an imminent bear rally,” he said Tuesday. “But the ultimate lows have not yet been reached.”