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Lingering concerns over recession hit its highest level in 10 years, as per the latest survey by Bank of America Merrill Lynch (BofAML).
Among global fund managers that BofAML surveyed, 38 per cent think a recession is likely in the next 12 months, the highest possibility of recession since August 2009.
However, 59 per cent does not see any recession.
The survey was done between September 6 and 12 and an overall 235 panelists with $683 billion in assets under management participated in the survey.
Cash level of fund managers dipped marginally 0.4 percentage point to 4.7 per cent, just above 10-year average of 4.6 per cent.
The FMS (Fund Manager Survey) cash rule works as follows: when average cash balance rises above 4.5 per cent, a contrarian buy signal is generated for equities and when the cash balance falls below 3.5 per cent, a contrarian sell signal is generated.
“The FMS Cash Rule has been in “buy” territory for 19 months,” BofAML said while adding that Bull - Bear indicator holds at 0.7, stays in contrarian “buy” territory.
The survey also highlighted that 38 per cent of investors think that the US-China trade war is the new normal as against 30 per cent who see a resolution before the 2020 US Presidential election.
Concerns over trade war fell by 11 percentage point with 40 per cent of investors saying it is the top “tail risk”, and topped the charts for 17 of the past 19 surveys.
The dominant concerns of investors since 2011 have been eurozone debt and potential breakdown, Chinese growth, populism, quantitative tightening and trade wars.
Allocation of fund managers to real estate jumped by 4 percentage points (ppt) to 3 year high at 11 per cent.
The survey added that allocation to US equities soared 15 ppt to 17 per cent with overweight call, the biggest month-on-month rise since June 2018 making the US the most preferred region among global fund managers.
On the other hand, allocation to emerging market equities declined 2 ppt MoM to 11 per cent.
“Allocation to EM equities peaked in March 2019 and has trended down since,” BofAML said.
