Just because stocks have enjoyed a bumper September doesn’t mean Wall Street doesn’t remain terrified of a possible U.S. recession within the year.
It simply means investor portfolios aren’t prepared for one.
About 38% of investors surveyed in a new Bank of America Merrill Lynch survey expect a recession over the next year versus 59% who see a recession as unlikely. That’s the highest net recession risk since August 2009.
Interestingly, investors are using the heightened negative backdrop on U.S. trade with China — and now oil demand from Saudi Arabia after a spate of drone attacks on a key production field - to wade back into stocks after a tough September.
Bank of America Merrill Lynch says investor cash levels have fallen to 4.7%, well off the recent high of 5.7% in June and a shade above the 10-year average of 4.6%. Investor allocation to equities are up eight points from August, the survey shows. Domestic equities have benefited the most from the sentiment shift, believe it or not, despite plunging reads on U.S. manufacturing and weakening GDP growth.
Value stocks in particular have enjoyed a nice influx of cash in September, Yahoo Finance reports.
The allocation to U.S. equities spiked 15 points to net 17% overweight, the biggest monthly increase since BofA’s June 2018 survey. That makes the U.S. the most preferred region among fund managers.
BofA’s latest fund manager survey was conducted Sept. 6 to Sept. 12, polling 235 managers with $683 billion in assets under management.