Managers' growth expectations plummet after Ukraine invasion – BofA survey

Investors' growth expectations are the lowest since the global financial crisis following Russia's invasion of Ukraine, according to the results of Bank of America's March Global Fund Manager Survey.

Of the 341 surveyed fund managers, which oversee a total of $1 trillion in assets, expectations of global growth were below a net -50% in March, the lowest since October 2008 and down from a net -20% in February.

The Russia-Ukraine conflict tops the list as the biggest tail risk for managers at 44% (previously 7% in February), followed by a global recession at 21% (up from 8% in February) and inflation at 18% (down from 23%).

Cash levels increased month-over-month to 5.9% in March, from 5.3% in February.

A net 57% among survey respondents expect global profits to decline over the next 12 months, a significant decline from the net 12% of respondents who communicated that expectation in February.

While cash levels, economic growth and profit expectations are recessionary, inflation expectations are not recessionary, so managers expect short-term interest rates to go up and not down, according to a report on the survey results.

Also, equity allocations are down but not at the capitulation levels normally seen in a recession, the report said.

Only 30% of fund managers expect a global economic boom (above-trend growth and inflation) over the next 12 months, down from 65% in February.

Also in the new survey, 51% of respondents believe inflation is permanent (up from 39% in February), while 42% believe it is transitory (down from 52% in February). Only 1% of respondents expect a recession, down from 2% in the prior month.

In addition, investors' appetite for risk is declining, with a net 41% of respondents saying they are currently taking lower-than-normal risk levels, compared with a net 18% in February and a net 8% in January.

Asset allocation to U.S. equities plummeted 27 percentage points month-over-month to a net 4% overweight. The allocation is down from a net 55% overweight in January and from a peak of a net 62% overweight in April 2021.