Sinking outlook for global growth is causing fund managers to hoard cash at the highest level since the start of the pandemic, Bank of America says
"Cash levels are recessionary. Economic growth and profit expectations are recessionary," wrote Bank of America's chief investment strategist.
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- Money managers have spiked up cash holdings as the outlook for global growth slides, Bank of America said Tuesday.
- Cash allocation of 5.9% is the highest since the coronavirus pandemic was declared in early 2020.
- A 60% majority of fund managers expect a bear market for equities in 2022.
Fund managers are driving into cash by the most in nearly two years as the war in Ukraine and hot inflation dim the outlook for global economic growth, according to a monthly survey from Bank of America released Tuesday.
Cash levels rose to 5.9% in March, the highest level since April 2020, the month after the World Health Organization declared the COVID-19 outbreak a pandemic. The cash level stood at 5.3% last month.
"Cash levels are recessionary. Economic growth and profit expectations are recessionary," wrote Michael Hartnett, Bank of America's chief investment strategist, in the March survey note.
The most recent reading was higher than the 5.4% cash allocation logged in July 2008 through October 2008, the time of the global financial crisis. But it was below the 8% level recorded during the dot-com crash more than 20 years ago.
The launch of Russia's war on Ukraine weighed on the growth view held by money managers surveyed between March 4 and March 10. That outlook has plunged to its lowest since July 2008 when investment bank Lehman Brothers was still scrambling for its survival.
Expectations for stagflation — or slow growth alongside rising prices — have now outstripped so-called boom expectations, at 62% versus 30%. And 60% of fund managers now expect a bear market in equities in 2022, up from 30% a month earlier.
But they remain overweight stocks, not underweight, the bank said. "[Equity] allocations are not at 'recessionary' close-your-eyes-and-buy levels," wrote Hartnett.
Bank of America