BofA warned investors in its poll published today that they should expect policy capitulation.
A full surrender in sentiment toward stocks and global economy is evident among fund managers polled by Bank of America, paving the way for an equities surge in 2023.
According to strategists lead by Michael Hartnett, the bank’s monthly global fund manager poll “screams macro surrender, investor capitulation, and commencement of policy capitulation,” in a note published on Tuesday. After the Federal Reserve eventually switches its focus away from raising interest rates, they predict that stock prices will bottom out in the first half of 2023.
Additionally, the strategists noted that investors had the greatest percentage of cash in their portfolios—6.3%—since April 2001 and that a net 49% of participants are underweight equities, saying that “market liquidity has dramatically deteriorated.”
According to a study of 326 fund managers who oversee $971 billion between October 7 and October 13, nearly a record number of respondents stated they anticipate a worse economy over the next 12 months, while 79% predict lower inflation during that time.
According to Hartnett, “the stock market remained impervious to the pessimistic feeling until last month, but it has started to better represent investors’ pessimism.”
Moreover, 83 percent of investors anticipate a decline in worldwide profits over the coming 12 months as the earnings season takes momentum. The majority since the global financial crisis, a net 91% of respondents stated that worldwide corporate profits are unlikely to increase by 10% or more in the upcoming year.
Furthermore, this finding predicts additional downward revisions to S&P 500 earnings predictions, according to the strategists.
The reporting season gets underway this week with the completion of major US banks and the release of results from Netflix, United Airlines Holdings, and Tesla.
However, global equities have increased recently as a result of technical level support, modifications to UK government policy, and an emphasis on profitability. Also, the surge following a US inflation print last week was referred to by Hartnett and his colleagues as a “bear embrace.”
