Liquidity. It’s topical. Because it’s impaired.

That’s the thing about liquidity: When it’s in the news, the news is generally bad. You never hear about liquidity when it’s ample.

On Monday, I spent some time discussing the extent to which the US equity market was thin amid the post-“Liberation Day” vol shock. Thin markets are prone to wild swings, and wild swings are conducive to still higher vol. That’s the vicious loop.

With that in mind, I wanted to highlight a few additional charts from the April edition of BofA’s Global Fund Manager survey which was far and away the most interesting vintage in years (it was also the 5th most bearish survey in the history of the poll).

The figure on the left, below, shows that panelists viewed liquidity conditions as the least favorable since March of 2023, which is to say since SVB collapsed, triggering a mini bank panic. As BofA’s Michael Hartnett noted, “just a net 4% said liquidity conditions are good.”

Ostensibly anyway, that matters for at least some survey participants. These are people who presumably trade frequently enough and in large enough lots that they’d be affected by thin markets.

The figure on the right shows BofA’s market stability indicator plotted with the 12-month rolling change in the S&P. The message is clear enough.

Relatedly, the share who admitted to taking “higher than normal” risk plunged to reflect the most risk averse panel in nearly two years, as illustrated on the left, below.

The figure on the right shows equity allocations dropped sharply again to a net 17% Underweight.

As Hartnett went on to note, global equity allocations as tipped by the poll “collapsed” 52ppt in the space of just two months, the most since April of 2020, when the global economy was put into an induced coma.