Stagflation fears surge and 'sentiment is dire' in BofA survey
"Stagflation" remains most popular economic backdrop expectation
Investor fears of stagflation are at the highest since the 2008 financial crisis, while global growth optimism has sunk to a record low, according to $BAC.US$'s monthly fund manager survey.
Weakest global profit expectations since the Lehman bankruptcy
Global earnings expectations also fell to 2008 levels, with Bank of America strategists noting that prior troughs in profit expectations occurred during other major Wall Street crises such as the collapse of Lehman Brothers and the bursting of the dotcom bubble.
Investors are long cash and commodities while short tech and consumer shares
BofA's survey, which included 266 participants with $747 billion under management in the week through June 10, ended before the US inflation data last Friday "shattered" hopes of the Federal Reserve pausing its aggressive cycle of rate hikes, according to strategists led by Michael Hartnett.
"Wall Street sentiment is dire but no big low in stocks before big high in yields and inflation, and the latter requires uber-hawkish Fed hikes in June & July," Hartnett wrote.
The results -- including 73% of respondents expecting a weaker economy in the next 12 months, the lowest since the survey started in 1994 -- provide insight into fund manager allocations and sentiment right before the $.SPX.US$ collapsed into a bear market on Monday as surging US inflation fueled fears of sharper Fed action.
In terms of positioning, investors are long cash, commodities, healthcare, resources, high quality and value stocks, while short positioning dominates bonds, European and emerging-market stocks, tech and consumer shares.
Moreover, Long oil and commodities were the most crowded trade, and many fund managers think oil will outperform in 2022.
Hawkish central banks were seen as the biggest tail risk to markets among investors, followed by a global recession.
Source: Bloomberg, BofA
Disclaimer: Investing involves risk and the potential to lose principal. Past performance does not guarantee future results. This is for information and illustrative purposes only. It should not be relied on as advice or recommendation.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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