Global fund managers polled by Bank of America Global Research in May remained in a bearish mood, with just 10% expecting a V-shaped recovery from the coronavirus shock and 25% a new bull market.
In contrast, 75% of investors said they expected a U- or W-shaped recovery, and 68% a bear market rally.
The survey was conducted May 7 to 14 among 223 panelists with $651 billion in assets under management.
Fund managers’ cash levels remained high at 5.7%, down slightly from 5.9% in April, which itself was the highest level since the 9/11 attacks.
According to the fund manager cash rule, 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.
Investors’ cash allocation fell 10 percentage points month over month to net 44% overweight.
May survey participants said the biggest tail was a second wave of COVID-19, cited by 52%. Other concerns trailed: permanently high unemployment, 15%; European Union breakup, 11%; and systematic credit event, 8% — way down from 30% in April.
Investors’ global growth expectations shot up by 40 points in May to net 38% expecting global growth to strengthen over the next 12 months, the highest level since January 2018, according to BofA.
However, they did not expect the manufacturing Purchasing Managers’ Index to rise above 50 before November. The latest reading showed the PMI at 41.5.