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Manager Sentiment Shows Full Capitulation

The sentiment on stocks and global growth among fund managers shows full capitulation, opening the way to an equities rally in 2023, says a survey by Bank of America Corp. Its strategists expect stocks to bottom in the first half of 2023 after the Federal Reserve finally pivots away from raising interest rates. “Market liquidity has deteriorated significantly,” it says, noting that investors have 6.3 per cent of their portfolios in cash, the highest since April 2001, and that a net 49 per cent of participants are underweight equities. Nearly a record number of those surveyed said they expect a weaker economy in the next 12 months, while 79 per cent forecast inflation will drop in the same period. As the earnings season gains traction, 83 per cent of investors expect global profits to worsen over the next 12 months. A net 91 per cent said global corporate profits are unlikely to rise 10 per cent or more in the next year ‒ the most since the global financial crisis ‒ and a sign that suggests further downside to S&P 500 earnings estimates.

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