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Economic growth expectations are now at a net
13%, the lowest since April 2020 and markedly down from a 91%
peak in March this year. The spread of the Delta variant was
cited as the reason for the pessimism, the popular monthly
survey said.
Despite the growing caution on the macroeconomic outlook,
positioning in asset markets remains overwhelmingly bullish.
Equity market protection designed to shield portfolios against a
sharp drop in asset values was at the lowest levels since
January 2008.
Nearly half of BofA's clients, with $840 billion in assets under
management, said they have removed protection against a sharp
fall in equity prices over the next three months, the lowest
figure since January 2018.
Moreover, broader equity market positioning remains firmly
bullish with net global equity allocations at 50%, far above a
20-year average of 29%, the survey said.
"A rare disconnect is growing between asset prices and
fundamentals," a team of strategists led by Michael Hartnett
wrote in a note to clients.
The broader market outlook remains one of greater caution with
survey respondents expecting central banks to remain dovish.
Eighty four percent of investors now expect the U.S. Federal
Reserve to start reeling in its stimulus measures by the end of
the year, though expectations for the first U.S. rate hike were
pushed out to February 2023 from November 2022 previously.
Moreover, 82% of respondents expect China to ease policy, up
from 44% in July.
Global liquidity conditions were widely seen as the best since
just before the global financial crisis hit world markets in
July 2007. Almost 60% of respondents in the survey said monetary
policy was "too simulative" which was the highest proportion
since May 2011.
(Reporting by Saikat Chatterjee; Editing by Marc Jones and
Philippa Fletcher)
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