Fund manager growth outlook hits all-time low as recession tops risk list - BofA

Apr. 12, 2022 7:59 AM ETSPDR S&P 500 Trust ETF (SPY), QQQSP500, NDX, USO, COMT, SHY, TBT, TLT, XLK, IYW, EFIV, MCHIBy: Kim Khan, SA News Editor7 Comments

Recession ahead - road sign warning concept

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Fund managers are bracing for a further decline in stocks as "fear of a fast and furious Fed" has global growth optimism to an all-time low, according to the latest BofA survey out Tuesday.

The April survey of 329 panelists with $929B in assets under management saw global growth optimism fall to -71%, eclipsing the low of August 2008.

That suggests a further decline in net equity allocation, according to BofA, which remains in the sell-the-rally camp (see chart).

The January and February stock selloff that saw a correction of about 12% in the S&P 500 (SP500) (NYSEARCA:SPY) and a bear-market decline of nearly 20% in the Nasdaq 100 (NDX) (NASDAQ:QQQ) was the "appetizer not main course of '22," strategist Michael Hartnett wrote.

"The disconnect between global growth and equity allocation remains staggering," Hartnett said. "Investors got slightly more bullish on equities. Though still at depressed levels, equities are nowhere near 'recessionary' close-your-eyes-and-buy levels."

Recession top tail risk, oil trade most crowded

A global recession supplanted the Russia/Ukraine war as the top tail risk, with 26% of respondents citing it, up from 21% in March.

Ukraine dropped to fourth place 16%, down 44%

Hawkish central banks were a close second at 25%, up sharply from 9% in the previous survey. Inflation came in third at 21%, up from 18%. Asset bubbles and COVID-19 rounded out the top six.

Among crowded trades, long oil (USO) and commodities (COMT) are still considered the most crowded, while short U.S. Treasuries (SHY) (TBT) (TLT) vaulted to second from fourth.

They are followed by long tech (XLK) (IYW), long ESG (EFIV), short China (MCHI) and long bitcoin (BTC-USD).

J.P. Morgan's Marko Kolanovic recommended taking some profits after boosting his overweight in equities.

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