The firm’s monthly Global Fund Manager survey questioned 195 panellists with $444 billion in assets under management.
A net 82 per cent of respondents said they are expecting the global economy to weaken, which Bank of America (BofA) said is the highest percentage in 30 years and is a significant change from 44 per cent in the previous month.
Some 42 per cent say they believe a recession is likely, which is the fourth-highest recession expectation of the last 20 years. The report noted this was a flip from the positioning last month when over half had said a recession was unlikely.
A trade war potentially triggering a recession was named as the largest tail risk, cited by 80 per cent of respondents. This was the largest concentration of a specific tail risk in 15 years. This was followed by concerns that inflation causes the Federal Reserve to hike interest rates at 10 per cent and a US dollar crash on international buyers strike, a new tail risk entry for April.
The expectations of a hard landing jumped from 11 per cent in March to 49 per cent in April while expectations for a soft version fell from 64 per cent to 37 per cent. Only 3 per cent are now expecting to see “no landing”.
As a result, a record number of global investors are cutting their allocations to US equities with allocations falling to a net 36 per cent underweight. In only two months, BofA said fund managers have slashed their US allocations by a record 53 percentage points.
The current weightings to US equities are 1.8 standard deviations below the long-term average and US equities is the largest underweight of all asset classes covered by the survey.
The largest overweight, in comparison, is to healthcare stocks and cash.
Respondents expressed a negative outlook on US profits and potential depreciation of the US dollar, explaining their lower exposure to the geographic region. A net 61 per cent expect the US dollar to depreciate over the next 12 months, the most since May 2006.
Overall equity allocations dropped to a net 17 per cent underweight and have collapsed 52 percentage points in the last two months.
Instead, bond allocations are at a net 17 per cent overweight, a reversal of a 13 per cent underweight in March and BofA said this is a record allocation to the asset.
