Money managers remain bearish as only 10% expect V-shape recovery: BofA

Cash levels remain elevated at 5.7% compared to a 10-year average of 4.7%

Investor sentiment continues to remain bearish with only 10 per cent money managers expecting a V-shaped recovery, according to a survey conducted by Bank of America (BoFA).

“Zeitgeist bearish: just 10 per cent expect a V-shaped recovery, 25 per cent a new bull market; in contrast 75 per cent expect a U or W-shaped recovery, 68 per cent a bear market rally,” the investment bank said.

Meanwhile, cash levels remained elevated at 5.7 per cent compared to 10-year average of 4.7 per cent.

According to the survey, the biggest tail risk for the market is a second wave of the pandemic. A total of 223 panelists managing $650 billion in assets were surveyed by BofA between May 7 and May 14.

Fund managers say a vaccine breakthrough could be catalyst for the V-shaped recovery.

Nearly three-fourth of the fund managers believe companies should reduce debt, 15 per cent said they should increase capex and 7 per cent said companies return cash to shareholders

Fund managers are favouring fixed-income more with bond allocation rising to highest level since July 2009, the survey revealed.

The most-crowded trade was US tech and growth stocks. Meanwhile, fund managers were short on emerging market for first time since September 2018 and were record long on the healthcare sector.