Investors are growing more pessimistic due to fears of rate hikes but do not expect a recession, according to the results of Bank of America's February Global Fund Manager Survey.
Of the 363 surveyed fund managers, which oversee a total of $1.1 trillion in assets, expectations of global growth came in at a net -20% in February.
Central bank rate hikes tops the list as the biggest tail risk for fund managers at 41%, followed by inflation at 23%, an asset bubble at 11%, a global recession at 8% and the Russia-Ukraine conflict at 7%.
Cash levels increased month-over-month to 5.3% in February, from 5% in January.
A net 10% among survey respondents expect global profits to decline over the next 12 months. In January, a net 10% of respondents said global profits would improve during the next 12 months.
According to a report on survey results, 65% of fund managers expect a global economic boom (above-trend growth and inflation) over the next 12 months, down from 71% in January. In the new survey, 52% of respondents believe inflation is transitory, while 39% believe it is permanent. Only 2% of respondents expect a recession.
Also, investors' appetite for risk is declining, with a net 18% of respondents saying they are currently taking lower-than-normal risk levels, compared with a net 8% in January.
Asset allocation to U.S. equities plummeted 24 percentage points month-over-month to a net 31% overweight. The allocation is still down from a peak of a net 62% overweight in April 2021.