Money managers' vibes are off
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Illustration: Sarah Grillo/Axios
The headline on Bank of America's monthly fund manager survey is "Bull crash" — the idea being that when sentiment plunges as much as this, that's normally a positive sign for the market.
Why it matters: As Warren Buffett — who's handily beating the market this year — likes to say, "Be fearful when others are greedy, and greedy when others are fearful."
By the numbers: Sentiment among global fund managers has taken a startling turn for the worse over the past month.
- The net share of managers expecting the global economy to be stronger this year than last year was a modest -2% in February. In March, it was -44%. That's the second biggest drop in global growth expectations ever.
- Similarly, while a net +17% of fund managers were overweight U.S. stocks last month, this month that figure fell to -23%, showing that most managers are now underweight the U.S. market. That 40-point fall in one month is the largest ever.
Between the lines: When fund managers are this pessimistic, they sell — which helps explain why the markets have been falling.
- The managers are now sitting on so much cash, says Bank of America, that the survey "sell signal" triggered in December has now ended.
- At some point, that cash is going to get spent buying up assets, which is why Bank of America thinks the decline in sentiment is bullish.
The bottom line: Global fund managers are down on the Magnificent 7, and increasingly bullish on China.
- Often, however, those sentiments do a better job of reflecting where the markets have gone over the past month than they do of suggesting where the markets are going.
