• Almost 70% of fund managers say this is a bear market rally
  • 75% predict a U-shape or W-shape recovery
  • Average cash balance is at the highest level since 9/11

Sixty-eight percent of fund managers believe this is just a bear market rally, according to the May Global Fund Manager Survey from BofA Global Research. Three quarters of respondents expect the economic recovery to take a U-shape or W-shape, versus 10% who expect a V-shaped recovery. Just 25% predict a new bull market.


Average cash balance remained elevated at 5.7%, a sign of bearishness. It is at the highest level since the 9/11 terrorist attacks. Sixty percent are long U.S. tech & growth stocks, and the report noted that the last time this many investors expected value to underperform growth was Dec. 2007. Global growth expectations jumped, but investors don't expect global manufacturing PMI to rise back above 50 before November.

The bearishness is curious after U.S. markets rebounded more than 30% from their lows in late March. Tech stocks, notably Amazon, Microsoft, Apple, Facebook, and Apple have led the indexes from their lows, and collectively account for 21% of the market cap of the S&P 500.


That slow recovery is pushing them to underweight cyclical assets (energy, equities, Europe) & overweight defensive assets (healthcare, cash, bonds). Seventy-three percent said corporations should reduce debt, 15% said increase capex, 7% said buyback stocks, increase dividends. Stock buybacks are not in favor right now as trillions of dollars are being spent by the government to rescue businesses and industries. Many companies have already said that hiring back workers is not a priority this year, which could keep unemployment levels high for months.

The biggest tail risk for investors, according to the survey, is a second COVID-19 wave. The greatest structural shifts expected in a post-pandemic world are supply chain reshoring, protectionism, and higher taxation.