Max Bearish

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I’ll start this post with a figure.

“Fund managers’ sentiment on profit 2022”, Bank of America Global Research

Fund managers are more pessimistic than they’ve ever been, with expectations for global growth and corporate profits at all-time lows.

Just as the Bank of America’s July Fund Manager Survey (FMS) shows, which also found those polled had the highest amount of cash on hand since September 2001, and their equity allocations were less than when Lehman Brothers collapsed in 2008. The bank began the survey in 1994.

The FMS also showed anticipation of a recession was now the consensus, and at the highest level since May 2020 following the onset of the COVID-19 pandemic. While all the participants felt inflation would ease, the mood was still “stagflationary,” and 50% said they wanted companies to shore up their balance sheets, as opposed to increasing capital spending (29%) or share repurchases (15%).

“Max Bearish”

The bank’s Bull & Bear indicator remained at “max bearish,” although investor sentiment indicated a stocks or credit rally in the coming weeks. 

The participants noted the most crowded trades in July were long U.S. dollar (41%), long oil and commodities (23%), long environmental, social, and governance (ESG) assets (12%), long cash (6%), and short U.S. Treasuries (6%).