The latest survey of professional investors reveals a turnaround – pure pessimism

The much acclaimed June survey by the Bank of America Merrill Lynch shows an incredible turnaround in the mood of professional investors…

The much acclaimed June survey by the Bank of America Merrill Lynch shows an incredible change in the mood of professional investors. The survey of 179 asset managers, who manage a total of 530 billion dollars, reveals scepticism on a scale not seen since the financial crisis of 2009.

The portfolio managers, first and foremost the Blackrock representative, warn against the uncertainties that could easily drive the S&P 500 down by 10 percent.

The fears of money managers

While last month’s survey considered the trade dispute with China to be the biggest threat to the markets by 37 percent, this fear has now risen to 56 percent. In addition, there are concerns in Europe about the outcome of the Brexit and once again in Italy.

As a result half of the asset managers surveyed by Bank of America Merrill Lynch expect global economic growth to slow significantly over the next twelve months. In May the ratio between positive and negative economic expectations was much better. Now it is already negative at five percent.

According to the bank’s chief strategist, Michael Hartnett, there has never been such a significant drop in expectations before.

According to his surveys 21 percent of the managers in the portfolios under review are underweighted in equities net, lower than the benchmark indices indicate. This is how low the equity ratio was last in March 2009 and thus in the midst of the financial crisis.

The dwindling confidence of investors in the power of central banks is also particularly interesting. 11 percent of investors see a certain “helplessness” of the central banks as the greatest unexpected risk for the markets. There are fears that the central banks will no longer be able to do enough to stabilise the markets. Just yesterday we wrote a comment about this: “The power of the central banks – does the Fed really still have it in its hands?”

Conclusion

The signals indicate a storm. But what makes us a little suspicious in our view of the markets (what is already included in the prices?) is the clear preparation of the “big ones” for the price collapse. There is a great imponderability in the short term. Should Donald Trump come up with the idea of “turning down” a compromise in the trading dispute, this would certainly result in a price rally that would catch these investors on the wrong foot with the corresponding mark coverings. Price slumps usually do not happen with preparation.

In the medium and long term the survey of the big managers reveals that the recession is closer than many economists would like to believe.

By Vlad Lazarenko – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=33219566

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