Nearly 70% of asset managers expect that a 20% correction is more likely than a 20% move higher in stocks, according to Citigroup's quarterly survey.
Since the last survey in March, the managers have shifted their view of who will win the White House. Former Vice President Joe Biden is now expected to win with 62% expecting it, a sharp reversal from December when 70% expected President Donald Trump to win. Views on who would win were split evenly in March.
The 140 fund managers polled by Citi say they are holding more of their portfolios in cash, despite the stock market rebound. Median cash holdings are 10%, flat with March, but twice the level of last June and double the historical average.
The buy side managers also had an average weighted target for the S&P 500 that is nearly flat with current levels, at 3,027 for year end, but a third expect the index to close above 3,200.
Fewer - 63% - want to commit new cash to the market, down from 80% in March. Technology, health care and communications services were the favorite sectors for market outperformance, while the "most unloved" were energy, REITs and Financials, according to Citi. They also expect dividend payers to underperform.
The managers also had a sharp change in views on the outlook for the dollar. About 60% now expect to see a weaker dollar, twice the number in March.
The quarterly survey of mutual fund, hedge fund and pension fund managers also found that 75% believe the 2021 consensus earnings forecast of $164 is too high. The average outlook for 2021 EPS gains was under 9%, but more than 30% of respondents said profits could climb 10%-20%.
About 57% expect unemployment between 7.5% and 10% by December, with 30% expecting the level remaining above 10%.