Global Fund Managers Holding '9/11' Cash Levels Amid 'Extreme Coronavirus Pessimism' - BofA Survey

Fund managers controlling more than half a trillion in assets are sitting on the lowest levels of global equities since March 2009 amid 'extreme investor pessimism' from the cornavirus pandemic.

Global Fund Managers are expecting a slower economic recovery from the coronavirus pandemic, a closely-watched survey indicated Tuesday, and are holding cash positions at levels last seen during the terrorist attacks of 9/11.

The April BofA Fund Managers' Survey, which polls more than 180 investors controlling around $545 billion in assets, suggesting nearly all are expecting a global recession this year, but only 15% see a V-shaped, or rapid recovery, once the pandemic wanes.

More than half, in fact, see a U-shaped coronavirus recovery and as a result are keeping equity allocations at the lowest levels since March 2009, BoFA said. Instead, the survey indicated, fund mangers are favoring cash, with allocations rising to 5.9% of total assets - the highest since September 2001 in the weeks following the terrorist attacks on the World Trade Center and the Pentagon.

Alongside cash positions, fund mangers are also long healthcare stocks, staples, tech and fixed income and are shunning energy, materials, industrials and banks. 

The fund managers are also pessimistic on corporate earnings, and are pushing companies to focus on balance sheet improvements over dividends and corporate buybacks. 

S&P 500 earnings, according to I/B/E/S data from Refinitiv, will slide 9% over the first quarter, from the same period last year, to a share-weighted $285.5 billion. 

The slump will then continue into the second quarter, when earnings will fall more than 20% from last year to $266.5 billion, cementing the first earnings recession -- defined by two consecutive quarters of profit contraction -- since 2016.

Looking to catalysts for the next few months, the survey noted the fund managers suggest a vaccine breakthrough, as well as a surge in China credit growth, could ignite a bullish reaction while a spike in the U.S. dollar in advance of a credit event, or a further collapse in the energy sector, would cement the bear case.