Money hoarding at 2001 excessive on stagflation worry, ballot reveals

Traders are piling into money because the outlook for world progress plunges to an all-time low and stagflation worries mount, in accordance with a Financial institution of America Corp fund supervisor survey that factors to continued inventory market declines.

Money ranges amongst buyers hit the best stage since September 2001, the report confirmed, with BofA describing the outcomes as “extraordinarily bearish.” This month’s survey of buyers with $872 billion underneath administration additionally confirmed that hawkish central banks are seen as the largest threat, adopted by a worldwide recession, whereas stagflation fears have risen to the best since 2008.

The outcomes make for grim studying for world equities, which have already suffered the longest weekly dropping streak for the reason that world monetary disaster as central banks flip off the financial faucets at a time of stubbornly excessive inflation. Whereas equities have seen a small rebound since Friday as valuations get extra enticing, strategists together with Michael Wilson at Morgan Stanley say extra losses lie forward.

Within the BofA report, strategist Michael Hartnett stated buyers imagine shares are susceptible to an imminent bear market rally, however final lows haven’t but been reached. With extra price hikes anticipated from the Federal Reserve, the market isn’t but at “full capitulation,” Harnett wrote within the notice.

Fears of a recession trumped the tail dangers from inflation and the conflict in Ukraine, the survey confirmed. The bearishness has been excessive sufficient to set off BofA’s personal purchase sign, a contrarian indicator for detecting entry factors into equities. Strategists equivalent to Kate Moore at BlackRock Inc. and Marko Kolanovic at JPMorgan Chase & Co. have additionally instructed that issues of an imminent recession are overblown.

The BofA survey additionally confirmed that expertise shares are within the largest “brief” since 2006. Frothy tech shares have been notably punished within the newest selloff amid issues about future earnings as charges rise. On Tuesday, Nasdaq futures jumped as a lot as 2.4% earlier than paring to 1.7% by 8:50 a.m. in New York, establishing tech shares for a rebound.

Total, buyers are very lengthy money, commodities, healthcare and client staples, and really brief expertise, equities, Europe and rising markets.

Different findings within the Might survey:

  • Traders now count on 7.9 Fed price hikes on this tightening cycle in contrast with 7.4 in April
  • Fund managers are most underweight equities since Might 2020; web 13% versus 6% chubby final month
  • Investor positioning turned essentially the most defensive since Might 2020, with mixed web 43% chubby in utilities, staples, healthcare
  • Financial threat is seen as the largest potential threat to monetary market stability, overtaking geopolitical threat
  • The Fed ‘put’ is seen at 3,529 for the S&P 500, which is about 12% under the present stage
  • Most crowded trades: lengthy oil/commodities (28%), brief US Treasuries (25%), lengthy tech shares (14%), lengthy Bitcoin (8%), lengthy ESG (7%), brief China shares (7%) and lengthy money (4%)

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