A widely followed Wall Street survey shows investors turning bearish again, raising cash levels

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Professional investors are turning more bearish again amid the current macro backdrop, according to a closely watched Wall Street survey from Bank of America. The bank’s Global Fund Manager survey showed investors have upped their cash levels and are maintaining a pessimistic outlook on growth and the economy. Specifically, strategist Michael Hartnett said the cash allocation among those surveyed increased to 5.3% from 4.9%, while staying neutral on stocks. The survey results come at a time of heightened uncertainty on Wall Street as yields pop, oil prices rise, inflation remains sticky and conflict unfolds in the Middle East. At the same time, investors continue to assess the outlook for rates after the Federal Reserve hinted one more increase could come before year-end. Fifty percent of those surveyed in October said they are bracing for a weaker global economy over the next 12 months, down only slightly from 53% in September. At the same time, investors have upped their bets on a hard-landing scenario and recession expectations. A soft landing remains the consensus expectation at 59%, but nearly a third of respondents are anticipation a hard landing, up from 21% in September. “1 out of 4 [fund manager survey] investors expect that there will be no recession in the next 18 months,” Hartnett said. “That said, the share of investors expecting a recession in H1’24 is rising…44% expect the global economy to fall into recession in Q1’24 or Q2’24 (vs 36% in the September FMS).” A record number of respondents also indicated that monetary policy remains too tight, while fiscal policy is too easy. Respondents viewing monetary policy as too restrictive, 24%, reached the highest level since November 2008. Despite the recent uptick in bond yields to multiyear highs, 56% of those surveyed expect yields to be lower in the next 12 months, which marks the largest share on record dating back to 2003. High inflation keeping the Fed hawkish remains the biggest tail risk for the market, respondents said, although 80% expect lower inflation over the next 12 months. While the survey showed heightened cash levels, raising case above 5% can often be viewed as contrarian buy signal, showing that investors got too pessimistic. The survey was taken between Oct. 6 and Oct. 10 and included 295 panelists with $736 billion in assets under management. — CNBC’s Michael Bloom contributed reporting.