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The risk appetite of investors remains depressed, not far from the extreme pessimism of 2022 and comparable to the levels of the 2009 Great Financial Crisis, according to the most recent Global Fund Manager Survey (FMS) conducted by Bank of America.
BofA's overall risk sentiment barometer, which takes into account growth expectations, as well as equities and cash allocations, became increasingly pessimistic in April, reaching the most negative levels thus far in 2023.
Another sign of the defensive stance of global fund managers is the strong underweight in equities relative to bonds, which is at levels not seen since the Great Financial Crisis.
BofA Sees "Pain Trades" If Recession Doesn't Materialize
"Bear sentiment is still contrarian supportive for risk assets" according to Bank of America chief investment strategist Michael Hartnett. The expert predicted "pain trades" in rising bond yield and a rally in bank equities and REITs (where there is presently a great deal of pessimism) if the consensus expectation for a recession is not soon realized in the second quarter. "If the recession hits in six months rather than six weeks, contrarian trades for April-May based just on FMS positioning include long US dollar, short gold, long banks-short bonds, long HY-short IG bonds, and long real estate-short tech," he said.
Key Takeaways From BofA Global FMS
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