Investors are turning bearish once more, flocking to cash as economic growth expectations falter, according to Bank of America Corp.’s global fund manager survey.
The broadest measure of sentiment — based on cash positions, equity allocation and economic predictions — fell in the October poll after showing an improvement in the summer months, strategists led by Michael Hartnett wrote in a note. Cash levels as a percentage of assets under management have climbed above 5%, they said.
Hartnett and the other analysts said there’s an “ongoing disconnect between equity market and growth expectations.” The majority of investors are still convinced the Federal Reserve has finished its rate-hiking cycle and bond yields will fall over the next 12 months, the poll results show. More than half of respondents see a year-end rally in stocks during the fourth quarter. In a contrarian buy signal, the cash allocations at their current level have typically preceded gains of 7% in the S&P 500 index over the coming six months.
In terms of equity allocation, fund managers stayed neutral on stocks, but rotated out of euro-zone equities into US shares in October at the fastest pace since September 2022. Hartnett said positioning shows the 4,200 level is a hard floor for the S&P 500 in the fourth quarter as long as bond yields don’t rise above 5%. The index closed around 4,373 on Monday.
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