Yesterday, Bank of America released the results of its Global Fund Manager Survey conducted from June 7th to the 13th, and the data did not paint a very positive picture for the global economy. In fact, BofAML labeled the monthly survey as the “most bearish survey of investor confidence since the Global Financial Crisis.” The trade war was reported as the greatest concern among respondents, but monetary policy and a slowdown in growth also came in high up on the list of risks. Given these trends, growth expectations are now at a record low for the survey.
These concerns have been playing into positioning as allocations reported in the survey have become increasingly defensive. The average cash balance held by respondents has skyrocketed to the largest since August 2011. Additionally, those surveyed reported the second largest MoM drop in equity allocation in the survey’s history. Equities that have been bought include defensive sectors like REITs, Utilities, and Staples. Currently, these are also the most overbought sectors from a technical perspective. Meanwhile, the most crowded trade as per the survey has become the safety of being long US Treasuries. That’s notable given the massive disparity of late between bond and equity flows.
Mutual fund flow data from ICI, most recently released today, is our best evidence for flows. Total equity outflows totaled $4.84 billion over the past week, which is in the 21st percentile of all flows in the data’s history. Meanwhile, bonds saw inflows totaling $3.43 bn. All equities except for Emerging Markets saw outflows with large-cap domestics seeing the largest of these outflows totaling $1.76 bn; EM saw a small inflow of $0.07 bn. Again, bonds broadly saw inflows, although Taxable Government and High Yield did see modest outflows. On a cumulative basis, bonds and world equities have been seeing inflows in very high percentiles. The opposite is true for equities. The Global Fund Manager Survey’s indicated elevated cash level is also showing up in ICI data as mutual funds overall saw total outflows this week of $2.89 billion.
Just one more piece of economic data mirroring the outflow from equities was the most recent quarterly Federal Reserve Z.1 Report released on June 6th. While this is lower frequency than these other reports, it showed a similar story of US households having less of their allocation placed in equities versus prior years. Whereas households have seen equities take up a greater portion of assets in the past several years, more recently this percentage has pulled back a bit, driven in no small part by market price declines in Q4. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.