SEven the Bible knows the story of the 7 fat years and the 7 lean years. In the stock market, the Ukraine war could now be the trigger for a switch from the fat to the lean years. According to Bank of America’s (BofA) latest monthly survey of fund managers around the world, most expect a bear market. This is because growth prospects have fallen to their lowest level since the 2008 financial crisis. The Bloomberg news agency reports that the effects of the war in Ukraine are also worrying.
Liquidity in the funds has reached its highest level since April 2020, the first days of the Covid-19 pandemic, as has the share of commodities. The proportion of equities, on the other hand, fell to its lowest level in almost two years. However, this is not yet at the “surrender level”, according to the strategists at BofA. Rather, investing in stocks excessively in relation to the growth of the global economy will correct that investors are still overweight in stocks, so that blind stock purchases are currently not an option. In view of this positioning, against the background of a more restrictive monetary policy, it is too early for a contrarian call to buy.
Correction instead of “surrender”
The war in Ukraine is currently by far the greatest risk for 44 percent of the fund managers surveyed. Recession worries at 21 percent and inflation worries at 18 percent follow in second place. Almost 2 thirds of respondents fear a phase of stagflation. This is the highest proportion for more than 13 years. In February, the proportion was still 30 percent. Nevertheless, 35 percent still expect an upswing; however, in February it was still 65 percent. just over half anticipate permanently higher inflation.
In addition to liquidity and commodities, defensive stocks are also in demand, mainly from the healthcare and energy sectors. However, bonds, equities from the euro area and cyclical stocks are not on the buy lists.