Global fund manager sentiment collapses on coronavirus fears
Sentiment among global fund managers has collapsed due to coronavirus and the oil shock as investors increasingly expect a global recession and fear the surging risk of debt defaults.
The Bank of America (BoA) global fund manager survey showed sentiment crashing close to 2008/9’s “bear extremes”, with the biggest drop in global growth expectations on record.
The survey came as governments and central banks scramble to deal with the economic fallout of coronavirus.
With people self-quarantining, offices and factories closed and restaurants and theatres effectively locked down, economic output is expected to crater.
BoA’s sentiment index fell from 2.5 to 1.7 in March, falling into “extreme bearish” territory. An investor is considered a “bear” when they think markets will keep falling.
The virus has sparked fears that a large number of firms have too much debt to be able to cope during a slowdown and may collapse as they fail to meet payments.
BoA’s survey showed a record number of investors think companies are over-leveraged. More than 60 per cent said they wanted firms to improve their balance sheets, the highest level since 2009.
Investors slashed their exposure to risk assets in March. BoA said it was the biggest monthly collapse in equity allocation ever, with the sell-off largest in the Eurozone and emerging markets.
In a sign of the high levels of uncertainty, investors preferred to move into cash more than bonds, the BoA survey showed.
A recovery in stocks would “further macro and market policy moves” as well as signs that, plus “the virus is peaking in Europe and US”.