December BAML Survey: Fund Managers Turn Extremely Bearish

BAML (Bank of America Merrill Lynch) conducted a survey that polled 243 global investors with $694 billion in total assets under management between December 7 and December 13.

This survey comes close on the heels of a large sell-off in the US markets. This December is turning out to be the worst the market has seen in decades. Initially, the markets were worried about the aggressive Federal Reserve rate hikes and the ongoing trade war. Fed Chair Jerome Powell sounded dovish during his address in late November, which calmed markets somewhat, but soon the sell-off resumed. The market optimism on the 90-day trade truce between the US and China (FXI) was also short-lived. Investors are growing wary of the expected deceleration in economic growth, earnings, and margins next year. Moreover, a part of the Treasury yield curve (AGG) inverted at the beginning of December, which added to market woes.

The US markets have joined the global markets in the downtrend. Year-to-date, returns on the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) are negative, while the NASDAQ Composite (QQQ) is holding onto meager gains. In December alone, SPY, DIA, and QQQ have fallen by 7.5%, 7.1%, and 6.5%, respectively.

The survey found that the equity allocations to US stocks declined by 8% to net 6% overweight. The allocation to global equities also fell by 15% to a two-year low of 16% overweight. Investors were most likely fleeing risk assets as growth and earnings expectations took a hit.