Asset Allocation to Global Stocks is at All-Time Lows

By Senad Karaahmetovic

Three out of five money managers are taking lower than normal risk, which is a record bearish positioning, writes Bank of America’s Chief Investment Strategist Michael Hartnett.

The bank’s Global Fund Manager Survey (FMS) for September shows cash levels are up to 6.1% from 5.7%, only even higher after 9/11 more than 20 years ago.

This isn’t surprising given that FMS asset allocation to global stocks is now at an all-time low. Similarly, managers are Underweight European equities more than ever and most Overweight Consumer Staples since the Global Financial Crisis.

“Max bear sentiment + benign data = SPX retests (& fails) 4300; we stay fundamentally & patiently bearish,” Hartnett said in a client note.

Similarly, the survey showed that global growth expectations are near all-time lows with as much as 72% of respondents expecting a “weaker” economy next year. Although inflation is still named as one of the top 3 tail risks (central bank hawkishness and geopolitics being the other two), 79% see falling inflation going in the next 12 months.

The bearish sentiment is also reflected in the recession odds with the probability now standing at 68%, the highest since May 2020.