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Market Extra: Portfolio managers are ‘super bearish’ with cash holdings highest since 9/11, Bank of America says


Global fund managers have been piling into the U.S. dollar and out of stocks lately, and by one measure have become the most bearish since Sept. 11, 2001.

That’s according to Bank of America’s September survey of global fund managers, whose unrelenting gloom is perhaps justified by a disappointing report on U.S. August inflation along with a looming energy crisis in Europe. Average cash balances for global managers hit 6.1%, according to the latest survey, the highest level since the deadly terrorist attacks on U.S. soil 21 years ago.

The “short-term ‘pain trade’ is up once again for risk assets,” wrote a team led by the bank’s chief investment strategist, Michael Hartnett, in a note released Tuesday. “Max bear sentiment + benign data = SPX retests (& fails) 4300…we stay fundamentally & patiently bearish.”

Bank of America

Along with the high cash holdings, a record net 60% of investors reported taking lower-than-normal risk, with inflation, central bank hawks and geopolitics cited as the top three tail risks. The most “crowded trade” was a long dollar position, which comes as little surprise as a continued search for safer assets have driven the greenback up more than 13% year to date.

The survey, aptly titled “Les Misérables,” showed global growth expectations nearing all-time lows, with a net 72% expecting economic weakness next year, though a net 79% expect inflation to fall in the next 12 months.

Bank of America

And while optimism appeared to return for markets at the start of September, with some Wall Street bulls maintaining recession can be avoided, global fund managers didn’t appear to be convinced. The share of those viewing a recession as likely rose further in September to 68%, the highest since May 2020.

Bank of America

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