How to invest in a 'recession scare': BofA survey
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Fund managers are at least thinking a "recession scare" could emerge in the market this year, reflecting one to two months of heightened geopolitical risks, elevated inflation and rising interest rates.
"Upcoming recession scare best played via long bonds-short commodities," said the latest Bank of America fund manager survey. The report reflects responses from 171 participants managing $391 billion in client money.
On the positive side, fund managers don't expect a technical recession this year (12% of surveyed see a recession) — rather worries about one potentially hitting markets.
A recession was the fourth "tail risk" to markets in the survey, placing behind "hawkish central bank" (number one), inflation (number two) and asset bubbles (number three). Recession expectations were unchanged compared to January's report.
"Bottom line: investors are bearish (e.g. cash levels jumped to 5.3%) but not extremely bearish (e.g. investors remain long cyclical stocks vs. bonds)," said the report's author Michael Hartnett.
Reflecting their concerns, tech stocks were the biggest underweight (a negative signal) among fund managers since August 2006.
To be sure, markets are trading with nervous vibes as February nears an end.
The Dow Jones Industrial Average fell 500 points on Friday. And all three major indices finished Monday's session in the red as traders hung on every development on the Russia and Ukraine front. Markets in Europe and Asia were under considerable pressure, too.
Stock futures indicated some stability on Tuesday after the sell-offs.
"So if I had to have one message for investors— and in our firm, we're trying to practice it — it's calm down. Don't get so excited. Because we are recovering from a massive pandemic shock, and the recovery trajectory has years to go," said Cumberland Advisors CIO David Kotok on Yahoo Finance Live.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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