Investors most pessimistic so far this year, BofA survey shows

The mood among global fund managers soured further in May, with investors flocking to cash amid concerns that a recession and credit crunch are looming, according to Bank of America Corp.’s latest survey.

The sentiment among fund managers deteriorated to the most bearish this year, with 65% of survey participants now expecting a weaker economy, BofA’s poll showed. At the same time, almost two thirds of investors see a soft landing as the most likely scenario for global economic growth and expect only a small contraction in earnings.

While cash levels rose to 5.6% in May, exposure to equities also climbed to the highest this year, while bond allocations are now the biggest since 2009, according to BofA. In a “flight to safety,” allocation to technology shares saw the biggest two-month increase since the global financial crisis and being long big tech is the most crowded trade.

The rally in global stocks has stalled in May, as investors fret over sticky inflation and the impact on growth from higher-for-longer interest rates. Continuing negotiations over the US debt ceiling are also putting a lid on risk appetite, though most surveyed fund managers expect it to be raised by the so-called X-date.