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Historic Collapse in Global Fund Manager Sentiment: BofA Survey

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Investor sentiment collapsed in March on the back of the coronavirus, oil shock, recession fears and surging debt default risk, according to the latest Bank of America Global Research global fund manager survey, released Tuesday.

Rising recession expectations prompted fund managers to slash global growth expectations by 67 percentage points to net 49%, the biggest monthly drop ever, going back to October 1994. Seventy-two percent of investors expected global growth to weaken over the next 12 months, while only 23% expected it to be stronger.

Inflation expectations fell 71 points to net 31% of investors expecting a lower global consumer price index in the next 12 months, the lowest level in more than eight years.

Eighty-three percent of survey participants said they expected below-trend growth and inflation in the global economy over the next 12 months, up 16 points from February, while just 9% thought the global economy would experience below-trend growth and above-trend inflation.

The survey was conducted March 6 to 12 among 207 panelists with $571 billion in assets under management.

Global corporate profit expectations dropped 49 points month over month to net 64% of investors saying they did not expect profits to improve over the next 12 months.

A record net 53% of investors said corporates were overleveraged, and 61% wanted corporates to improve balance sheets, the highest level since June 2009.

Fund managers’ average cash balance shot up to 5.1% from 4% in February, the fourth largest monthly increase on record.

The fund manager cash rule holds that when average cash balance rises above 4.5%, a contrarian buy signal is generated for equities. When the cash balance falls below 3.5%, a contrarian sell signal is generated.

Allocation to cash increased by 32 percentage points month over month to net 41% overweight, the biggest jump into cash ever, according to BofA.

March saw the largest monthly drop ever in fund managers’ equity allocation, down 35 points to net 2% underweight. Eurozone and emerging markets led the way, down 26 points and 18 points.

Allocation to U.S. equities fell 16 points to net 3% overweight, the lowest in eight months.

The survey found that the sector allocation to banks was the lowest since July 2016 at net 15% underweight, down 14 points month over month. It was highest to utilities, up 13 points to net 7% underweight, and to health care, up 11 points to net 39% overweight.

Fund managers’ bond allocations jumped 12 points from February to net 28% underweight.

In the March survey, 58% of participants said COVID-19 was the biggest tail risk. Other concerns paled by comparison: monetary policy impotence, 15%; outcome of the November U.S. presidential election, 11%; and a popping bond bubble, 6%.

Here are the most-crowded trades in March, according to fund managers in the survey:

  • Long U.S. Treasuries – 62%
  • Long US tech and growth stocks –18%
  • Long gold –7%
  • Long investment-grade corporate bonds –7%


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