LONDON: Fund managers have dumped stocks for cash, upping their currency allocations to the highest levels since 9/11, at an average of more than 6%.

Managers responding to Bank of America’s monthly global fund manager survey also expressed the bleakest outlook on global growth since the survey began more than 20 years ago, with nearly two-thirds saying they doubt the economy will strengthen.

The move out of equities came as the survey’s respondents reported their highest bearish conviction since the height of the Covid-19 crisis, on fears of stagflation and a global recession.

BoA chief strategist Michael Hartnett noted that top-level indicators of stress show further pain lies ahead before capitulation.

‘Our financial market stability risks indicator is currently at 7.5, a record high,’ he said.

‘Elevated levels of risk aversion [are] comparable to prior crisis moments (GFC, Covid shock). The high perceived risk to financial market stability also points to a further decline in equity prices.’

Respondents reported their lowest positioning in equities since May 2020, with an average underweight of 13%, against a 6% overweight in April.

More than a quarter anticipate there will be a global recession this year. This was the second most cited ‘tail risk’ after hawkish moves by central banks.

Survey takers were also most concerned about stagflation, with 77% expecting inflation to rise without accompanying growth – up from 66% in April.

However, 68% expect the rate of inflation to drop this year, with only 34% anticipating a rise in bond yields.

Allocation to tech stocks was at its lowest since August 2006, with survey takers holding an average underweight of 12%, while Europe and emerging market equities were also disliked. Investors were long commodities, healthcare and consumer staples.

Among contrarians anticipating a recession in the second half of the year, the favoured trade was to buy bonds and short commodities.

Those who expect central banks to bring a soft landing in inflation, plan to buy emerging market and European equities.