By Barbara Kollmeyer
Welcome to turnaround Tuesday, though there’s little turn at play considering Monday was the fourth straight day of gains for both the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.31% and Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.64% .
While Wall Street stocks continue to trek higher this quarter, the mood darkens among global fund managers. So says the latest monthly survey from Bank of America, which reports those managers have turned negative on global growth expectations for the first time since early COVID-19 pandemic days — April 2020.
The chief reasons are inflation worries and slowing China growth that have led to an exodus out of bonds and into cash, where levels leapt to a 12-month high. The survey is the least bullish since October 2020.
Our call of the day takes a look at just where those managers are putting money. One big difference between this month and last was that big shift to cash and a sizable move out of bonds. Global bond allocation, in fact, dropped to a net -80%, the lowest ever, as inflation fears continue to push up interest-rate hike expectations.
Money is still going into stocks, which jars a bit when considering the negativity on the global economy.
Where are they positioning now? Long on those assets exposed to inflation and short on those that could suffer from a Federal Reserve taper of its stimulus efforts.
Energy, cash, banks and commodities were ahead in the latest month, and healthcare, bonds and staples were kicked to the curb.
Global profit expectations have also turned negative, to the lowest level since May 2020, and corporate profit margins are expected to continue deteriorating — a net 51% of managers expecting that to happen. That means overweight commodities and banks, and underweight bonds, emerging markets and utilities — perceived as vulnerable to interest rate hikes, said Bank of America.
Here are two more worthwhile charts from the survey, the below showing 38% of investors believe inflation is permanent and 69% see it as transitory, though that gap is narrowing.
And this one on oil, that shows things a bit neck-and-neck as to whether crude will hit $100 a barrel this year, as Bank of America itself believes will happen.
But clearly expectations for higher oil aren’t hurting the energy sector as the money flows in, even as some say beware on that bet .
Healthcare giant Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +0.60% reported an earnings beat , with United Airlines /zigman2/quotes/205037281/composite UAL +4.24% still to come and streaming entertainment service Netflix /zigman2/quotes/202353025/composite NFLX +0.40% after the bell. Tesla /zigman2/quotes/203558040/composite TSLA +1.64% is headed for a 7th straight gain ahead of earnings after Wednesday’s close.