- Professional investors have taken their highest cash positions since the Sept. 11, 2001 terror attacks, according to the Bank of America Global Fund Managers survey.
- Respondents also want companies to rebuild their balance sheets, with just 5% saying they would like to see more share buybacks.
- Allocation to stocks is at its lowest level since March 2009, just prior to the beginning of the longest bull market in history.
Professional investors are heading for the sidelines while demanding that companies stop using their cash to buy back stocks and instead improve their balance sheets.
The Bank of America Global Fund Manager survey for April reflects the large level of caution seen in the markets since efforts to stop the coronavirus have shut down large portions of the world's economic activity and abruptly halted the longest bull market in U.S. history.
Among the most notable developments was the move to cash.
Managers reported average cash balances of 5.9%, up from 5.1% in the March survey just as the damage from the virus was beginning. That's the highest cash balance since the Sept. 11, 2001 terror attacks.
Michael Hartnett, chief investment strategist at BofA Global Research, said he interprets the move to cash as "peak pessimism" as equity allocation hits its lowest since March 2009, when the market bottomed and the 12-year bull market began.
At the same time, investors are looking for sharp changes in corporate cash use.
Just 5% want to see more share buybacks, the lowest level in 20 years, while 79% want to see improvement in company balance sheets, which is the highest level over the same period.
Nearly all respondents — 93% — are expecting a global recession this year and are looking for steep cuts to earnings expectations. There are differing opinions as how the recovery will take shape, but 52% see it as being "U" shaped, with a longer delay before the upturn. Some 22% see a "W" recovery with multiple peaks and valleys, while just 17% anticipate a "V" shape where the recovery is about as a sharp as the decline.
The survey reflects both deeper worries about the near-term trend as well as hopes for a strong recovery on the other side.
In its latest analysis, Goldman Sachs said it anticipates global gross domestic product to fall 35% in the second quarter from the first three months of the year. There is expected to be a sharp rebound in the second half that while still below the pace of 2019 will be well above the second-quarter plunge.
From an investment perspective, BofA survey respondents said their top positions are U.S. Treasurys, followed by cash, the U.S. dollar, and tech and growth stocks.