The survey cited cash levels jumping to a net 5.3% in September from 4.9% the previous month, now above what Bank of America deems a "normal" 4% to 5% range, although it remains well below the "max bear" level of 6.3% reported in October 2022.
Growth expectations remain pessimistic, with a net 50% of surveyed investors expecting the global economy to weaken over the next 12 months. That percentage has waffled over the last few months, with a net 53% expressing that sentiment in September, which was up from 45% in August, which was down from 60% in July.
Equity allocations for October fell 1 percentage point from September's net 3% underweight to a net 4% underweight, according to the survey. In September, equity allocations represented the highest recorded by the survey since April 2022.
Investors were also asked when they expect a recession, and 25% expect a recession sometime in the next 18 months, down from 27% that responded with that answer in September, while 44% expect a recession to begin specifically in the first half of 2024, up from 36% in September, and 20% expect a recession to begin specifically in the second half of 2024. Five percent expect a recession to begin before the end of this year.
Meanwhile, 59% of investors say they expect a "soft landing" for the economy over the next 12 months, down from 64% in September. The percentage of those expecting a "hard landing" increased to 30% in October from 21% the previous month.
When asked to identify the biggest tail risk, 31% of managers said high inflation keeping central banks hawkish, the highest response, although down from 40% that expressed that belief in September, while 23% cited worsening politics (equal to September); 21%, global recession/hard landing (up from 13%); systemic credit event, 15% (up from 13%); AI/tech bubble, 4% (down from 10%); and China real estate bust, 3% (down from 8%).
The poll surveyed 295 participants with $736 billion in assets under management and was conducted Oct. 6-12.