According to the latest BofA Merrill Lynch Fund Manager Survey, 42% of global investors are overweight on cash, taking their balances to 5.6%, their highest levels since 2001. The FMS also shows that investors have “reset” expectations for macro & markets lower and see default/recession as risk rather than reality. Actually, for the first time since July 2012, both growth and profit expectations are negative.
More than a slowdown in China, the biggest tail risk for global investors surveyed is a recession in the US, where ninety percent of fund managers expect no more than two Fed hikes in the next 12 months, up from 40 percent in December 2015.
Other key takeaways include the fact that positions in equities have fallen sharply to a net 5% from January’s 21%, while bullishness is growing on bonds. In regards to trades, the most crowded continues to be long US dollar, followed by shorting oil and shorting Emerging Markets. The most preferred region globally is Europe with 36% of managers overweight in it.
“Investors have ‘reset’ expectations for macro and markets lower and see default/recession as a risk rather than a reality,” said Michael Hartnett, chief investment strategist.
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