(Bloomberg) -- The sentiment on stocks and global growth among fund managers surveyed by Bank of America Corp. shows full capitulation, opening the way to an equities rally in 2023.<\/p>\n
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The banks monthly global fund manager survey screams macro capitulation, investor capitulation, start of policy capitulation, strategists led by Michael Hartnett wrote in a note on Tuesday. They expect stocks to bottom in the first half of 2023 after the Federal Reserve finally pivots away from raising interest rates.<\/p>\n
Market liquidity has deteriorated significantly, the strategists said, noting that investors have 6.3% of their portfolios in cash, the highest since April 2001, and that a net 49% of participants are underweight equities.<\/p>\n
Nearly a record number of those surveyed said they expect a weaker economy in the next 12 months, while 79% forecast inflation will drop in the same period, according to the survey of 326 fund managers with $971 billion under management, which was conducted from Oct. 7 to Oct. 13.<\/p>\n
While the stock market was immune to the bleak sentiment till last month, it has started to better reflect investors pessimism, Hartnett wrote.<\/p>\n
As the earnings season gains traction, 83% of investors expect global profits to worsen over the next 12 months. A net 91% said global corporate profits are unlikely to rise 10% or more in the next year -- the most since the global financial crisis -- a sign that suggests further downside to S&P 500 earnings estimates, according to the strategists.<\/p>\n
Reporting season starts in earnest this week with major US banks out of the way and Netflix Inc., United Airlines Holdings Inc. and Tesla Inc. slated to release results.<\/p>\n
Story continues<\/p>\n
Global equities have rallied in recent days amid support from technical levels, changes in UK government policies and a focus on earnings. Hartnett and his team described the rally after a US inflation print last week as a bear hug.<\/p>\n
Other survey highlights include:<\/p>\n
In absolute terms, investors are most bullish on cash, health care, energy and staples, and most bearish on equities, UK and Eurozone stocks, as well as bonds<\/p>\n
The most crowded trades are long US dollar, short Europe equities, long ESG assets, long oil, short emerging markets\/China debt and equities as well as short UK debt and equity<\/p>\n
A record high share of 68% see the dollar as overvalued<\/p>\n
Investors see European sovereign-debt markets as the most likely source for a systemic credit event<\/p>\n
Investors see rising odds of a policy pivot in the next 12 months, with 28% of participants seeing lower short-term rates within that timeframe<\/p>\n
(Updates with earnings details in seventh paragraph.)<\/p>\n
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BofA Survey Screams Capitulation With Rally Set for 2023 - Yahoo Finance<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" (Bloomberg) -- The sentiment on stocks and global growth among fund managers surveyed by Bank of America Corp. shows full capitulation, opening the way to an equities rally in 2023 Continue reading