Systemic Credit Event Now Top Concern
Worries about a systemic credit event have surpassed concerns about high inflation, the Bank of America's ‘March Global Fund Manager Survey.’ It shows 31 per cent of managers polled in March said a systemic credit event posed the biggest threat to global markets, while 25 per cent pointed to persistently high inflation as the largest tail risk. Nearly 40 per cent of respondents cited high inflation as their greatest concern in the February survey. Hawkish central banks (15 per cent of respondents) and worsening geopolitics (14 per cent) were the other top concerns for managers in March. U.S. shadow banking was cited by 34 per cent as the likeliest culprit behind a potential systemic credit event. Other possible sources identified for a credit crunch were U.S. corporate debt, developed markets real estate, and Chinese real estate. Overall, the survey found that investor sentiment is now close to "levels of pessimism seen at lows of (the) past 20 years."