The sentiment on stocks and global growth among fund managers surveyed by Bank of America Corp. shows full capitulation, opening the way to an equities rally in 2023.
The bank’s monthly global fund manager survey “screams macro capitulation, investor capitulation, start of policy capitulation,” strategists led by Michael Hartnett wrote in a note on Tuesday.
They expect stocks to bottom in the first half of 2023 after the Federal Reserve finally pivots away from raising interest rates.
“Market liquidity has deteriorated significantly,” the strategists said, noting that investors have 6.3% of their portfolios in cash, the highest since April 2001, and that a net 49% of participants are underweight equities.
Nearly a record number of those surveyed said they expect a weaker economy in the next 12 months, while 79% forecast inflation will drop in the same period, according to the survey of 326 fund managers with $971 billion under management, which was conducted from Oct. 7 to Oct. 13.
“While the stock market was immune to the bleak sentiment till last month, it has started to better reflect investors’ pessimism,” Hartnett wrote.