Fund managers have reduced their US equity allocations to the lowest level in history, with cash holdings increasing by 60% over the past five years. A recent Bank of America survey found that the “bull crash” has accelerated, coinciding with past end-of-correction periods. Despite this, positioning is not extremely bearish, and many expect a soft landing.
Stock markets slid on Tuesday, with the S&P 500 down 1.2% and the Nasdaq Composite falling 1.7%. The Dow Jones Industrial Average dropped 348 points. Global growth expectations have plummeted by 44%, but 64% of respondents still anticipate a soft landing.
The survey also shows that 68% expect the Federal Reserve to cut interest rates two to three times. In terms of asset allocation, cash now accounts for 4.1% of holdings, up from 3.5%. Global equities have decreased by 29 percentage points, with US and tech sectors experiencing the largest decline in two years.
Interestingly, euro-zone shares are seeing a significant increase, making them the highest allocation in nearly four years. Banks, however, remain the most favored industry among respondents. A contrarian trade suggests going long on equities, particularly tech, while shorting cash and staples. Conversely, bears who expect US recession risks to rise may consider going long on bonds and shorting banks and European assets.
Source: https://qz.com/bull-crash-stocks-bofa-fund-managers-cash-economy-1851770734