Sentiment among fund managers is “super-bearish,” according to the September vintage of BofA’s closely watched monthly poll.
It’s not “news,” per se. Chronic under-positioning tied to abysmal sentiment became a fixture of the fundamental / discretionary crowd over the summer, a state of affairs which added fuel to the rebound in equities from the June lows.
Still, the scope and pervasiveness of investor despair is notable. Average cash levels reached 6.1% this month in BofA’s survey, the most since 9/11 (figure on the left, below).
Fund managers can hardly be blamed. After all, there are worse places to park your money in 2022. In fact, USD cash is the best-performing asset class on the planet this year outside of select commodities.
That said, elevated cash balances are obviously indicative of risk aversion and, as the figure on the right (above) shows, the share of BofA survey respondents taking a higher than normal level of risk reached a record low.
Expectations for global growth are near all-time lows too. A net 72% expect a weaker economy, not materially better than recent readings marking records.
At the same time, FMS investors slashed their net underweight in stocks to -52% (figure on the right, below). There’s no comparable print in the history of BofA’s survey.
If you’re wondering whether that series has any predictive power vis-à-vis equities, the answer is… well, you can draw your own conclusions (figure on the left).
The most crowded trade (obviously) is “long USD.” The biggest tail risk remained “sticky” high inflation, followed by “hawkish central banks.” Notably, “geopolitics” grabbed the number three spot, with 17% of the vote, matching the share garnered by “global recession.”
212 panelists with more than $600 billion in AUM participated in the global edition of the survey.
BofA’s Michael Hartnett isn’t swayed that max bearishness marks a true turning point for equities. “Max bear sentiment plus benign data equals SPX retests 4,300,” he wrote. That retest will ultimately fail, he said, adding that BofA “stays fundamentally and patiently bearish.”
