This at least is shown by Bank of America’s (BofA) April monthly Fund Manager Survey, which surveyed 392 managers around the world who collectively manage assets of US$929 billion.
The sample shows an increase in the outlook for a recession, which becomes the biggest risk to markets, even ahead of rate hikes, inflation and the Russia-Ukraine war.
In addition, the report shows that investor sentiment is bearish: global growth expectations plummeted to their lowest level on record (-71% net) since the survey has been conducted.
According to the report, “the disconnect between global growth and equity allocation remains staggering. Investors were slightly more optimistic about stocks. Although still at depressed levels, stocks are nowhere near recessionary levels.”
The survey also highlights that the financial market stability risk index is currently at 6.4 points, implying that investors are seeing levels of risk comparable to the Covid crisis. Thus, the perceived level points to a further fall in stock prices.
In fact, the majority of investors (64%) expect the S&P500 to break down to the 4,000 level, rather than rise above 5,000 (26%).
Asked about the biggest risks to the stability of financial markets, geopolitical risk reached 92% of responses (slightly down 3% from last month), followed by currency risk at 83%, and then business cycle risk at 71%.
Along with this, the report also shows that overall corporate earnings expectations have deteriorated to -63% net in April 2022, the lowest level since March 2020. Other previous instances of such low levels include the collapse of LTCM (Long-Term Capital Management), the bursting of the dot-com bubble, the Lehman bankruptcy and Covid.
Meanwhile, the number of respondents who think inflation is permanent fell to 49%, from 51% the previous month. Forty-three percent of investors believe it is transitory.