(Boursier.com) — Investors are brooding. Bank of America’s monthly survey of fund managers shows traders’ fears of stagflation at their highest level since the 2008 financial crisis, while global growth optimism hits a low level since the survey began in 1994. Global earnings forecasts have also fallen to 2008 levels, with BofA strategists noting that previous lows in earnings forecasts have occurred during major crises on Wall Street, such as the bankruptcy of Lehman Brothers and the bursting of the dot-com bubble.
BofA’s survey, of 266 professionals managing $747 billion in the week ended June 10, ended before Friday’s U.S. inflation data “shattered” hopes that the Federal Reserve to pause its aggressive rate hike cycle, say strategists led by Michael Hartnett. “Wall Street sentiment is dire, but there’s no big dip to be expected in equities before a ‘big top’ in yields and inflation, and the latter requires an ultra-hawkish move from the Fed. in June and July.
The highest “tail risk” for equities is a more hawkish-than-expected Federal Reserve, investors say, ahead of a global recession. In terms of positioning, investors are ‘long’ in cash, US dollar, commodities, healthcare, resources, high quality and value stocks, and conversely ‘short’ in bonds, European equities and emerging markets, technology and consumer.
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