Investors rack up cash reserves and abandon equities amid recession fears
Investors are predicting a sustained slump in equity markets and are racking up cash reserves as confidence in global growth outlook plunges, according to a new survey from Bank of America.
Fund managers are now more concerned about the outlook for global growth than at any time since the financial crisis, while cash reserves had hit a two-year high, according to a survey of top global fund managers by the Bank of America.
The majority of Investors managing about $1trn in assets, surveyed between 4th and 10th March, said they are expecting an equity bear market this year and are slashing their exposure in response, with global equity allocations dropping to their lowest levels since May 2020.
Commodity allocations meanwhile have risen to a record 33 per cent on the back of a surge in commodity prices in the past two weeks, with fund managers looking to capitalise.
Oil prices have dipped below $100 today, however, while gold and silver have seen a sustained slide in the past two days as central banks on both sides of the Atlantic prepare to hike interest rates, dampening the appeal of low-yield metals.
European fund managers painted a grim picture of growth with fund managers slashing growth expectations and 69 per cent of respondents now saying they expected the European economy to weaken over the coming year – the highest share since 2011.
The figure marked an 81 per cent fall on February, the biggest month-on-month plunge since Bank of America’s records began in 1995.
The figures from Bank of America came as investment platform Hargreaves Lansdown painted a similarly bleak picture of retail investor outlook today after the invasion of Ukraine caused confidence to plunge and led to rocketing commodities prices.
Hargreaves found that confidence across global sectors had fallen in the past month, with confidence in Europe suffering a 36 per cent fall, the heaviest of any market.
Analysts said soaring commodity costs and sanctions combined with a covid resurgence in China had given investors the jitters.
“There has been a severe jolt to investor confidence since the invasion of Ukraine, as sanctions have been slapped on Russia, and commodity prices roared upwards,” said Susannah Streeter, senior investment and markets analyst at Hargreaves.
“Confidence in the UK has dropped by more than a fifth (22%) as investors assess the ricochet effect sanctions will have on industries across the board, as they grapple with higher food and transport costs, and a hit to consumer spending power.”
Streeter warned that investor confidence in the UK had dropped back to levels not seen for 18 months when the country was reeling from the initial impact of pandemic restrictions.
Covid outbreaks in China have caused Apple supplier FoxConn, and the car manufacturers Toyota and Volkswagen to suspend productions, while the tech city of Shenzhen remains in lockdown, leading markets lower.
The Hang Seng in Hong Kong has been rocked for the second session in a row, as tens of millions of citizens are locked down in the northern eastern province of Jilin, the first time an entire province has been quarantined since the start of the pandemic.