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Fund managers haven’t been this bearish about the global economy’s outlook since November 2008, according to the latest Bank of America Lynch survey of global fund managers, an important measure of investor sentiment.
According to the survey, 44% of the fund managers expect global growth to decelerate in the next year, the worst outlook since November 2008. What’s more, 54% are anticipating a slowdown in Chinese growth in the next year, the most bearish they’ve been in over 2 years.
While fund managers’ expectations for global GDP growth is the lowest since November 2008 and China GDP the lowest since February 2016, only 11% of the fund managers surveyed are anticipating a global recession in 2019, the survey found.
All of this comes as financial markets have been hit with a bout of volatility. On Monday, the Dow shed more than 600 points.
“We remain bearish, as investor positioning does not yet signal ‘The Big Low’ in asset markets,” Michael Hartnett, chief investment strategist, wrote in the report.
The biggest tail risks according to fund managers surveyed include the trade war (35%), quantitative tightening (26%), and a China slowdown (14%).
During the October correction, fund managers put some cash to work with cash levels dropping from 5.1% to 4.7% in November. Fund managers allocated to U.S. and emerging market stocks, REITs, and healthcare. Their allocation to the tech sector, with “FAANG” and “BAT” remaining the most “crowded trade,” dropped to the lowest level since February 2009. Other crowded trades, according to the survey, include short U.S. treasuries and long the U.S. dollar.
The fund managers surveyed expect the S&P 500 (^GSPC) will peak at 3056, a 12% upside from current levels. However, about 30% of the fund managers think U.S. stocks have already peaked, up from 16% from last month’s survey.
What’s more, these fund managers are waiting for the yield on the 10-year to hit 3.7% before rotating from stocks into bonds.
The survey polled 225 fund managers managing $641 billion in assets under management.
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.