Fund managers are the most pessimistic of the year, precisely as the stock market flirts with its best levels.
Bank of America’s monthly fund manager survey found that investors’ equity allocation fell 2 percentage points to a net 29% underweight in April. The S&P 500 SPX, +0.09% on Tuesday was at 4,154, near its 2023 high of 4,180.
That’s as growth expectations also have deteriorated after a wave of mostly gloomy U.S. economic data. A net 63% expect a weaker economy over the next 12 months, the most pessimistic view since December.
The fund managers also expect both global inflation, and short-term rates, to head lower.
A plurality of 35% expects the Fed to start an easing cycle in the first quarter of 2024, while 14% say the Fed cuts will start in the next quarter, in the third quarter of 2023.
Some 80% of investors expect the U.S. debt ceiling to be raised by September. House Speaker Kevin McCarthy set out his views this week on the New York Stock Exchange, as he called for spending cuts that President Joe Biden opposes.
Investors are now saying gold is overvalued for the first time in 19 months. Gold GC00, -0.87% has climbed 10% this year and is holding over $2,000 an ounce.
They view the most crowded trades as being long big tech stocks and being short U.S. banks. Crowded or not, they see the biggest tail risk as a bank credit crunch and global recession.
This article was originally published by Marketwatch.com. Read the original article here.