Money managers' expectations for the global economy have plummeted as a result of the coronavirus pandemic, oil price shock, recession fears and surging debt default risk, according to Bank of America Merrill Lynch's monthly fund manager survey released Tuesday.
The latest survey saw the largest monthly drop in global growth expectations since the survey began in 1994, with a net 49% of surveyed managers expecting global growth to deteriorate over the next 12 months.
In February's survey, a net 18% of managers expected global growth to improve over the next year, down from 36% in January yet still above 2019 lows.
Meanwhile, inflation expectations dropped 71 percentage points from last month to a net 31% of survey participants expecting a higher global consumer price index in the next 12 months. It is the lowest inflation expectation among surveyed managers since January 2012.
The survey of 183 money managers representing a total of $516 billion in assets under management was conducted March 6-12.
The survey also revealed that 83% of fund managers expect below-trend growth and inflation over the next year, up 16 percentage points from February. Large-cap stocks are expected to outperform small-cap stocks over the next 12 months, according to a net 51% of survey respondents, up 12 percentage points from February.
Cash levels jumped to 5.1% from 4%, the biggest increase since 2001 and above the 10-year average of 4.6%. The February cash level had been the lowest since March 2013. The allocation to global equities, meanwhile, dropped 35 percentage points (the largest such drop since 2001) to a net 2% underweight, itself a six-month low.
The coronavirus pandemic is by far the No. 1 tail risk among surveyed managers, at 58%, up from 21% in the February survey, with monetary policy impotence, the outcome of the 2020 U.S. presidential election and the popping up of the bond bubble as other top concerns for managers. Exact percentages were not provided.
