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Fund managers’ fears over late-cycle economy hit 2008 levels

Fund managers’ fears over late-cycle economy hit 2008 levels

Global fund managers are forecasting the end of the current economic cycle in levels that have not been seen since 2008, according to the latest Bank of America Merrill Lynch survey.

In the latest monthly sentiment check – which gauged responses of 163 participants running $510 billion in combined assets – 70% said the market has entered its late-cycle phase.

That marks a steady increase from a near-zero response in mid-2009 to the current figure, which is the highest level recorded by the monthly survey since January 2008.

This outcome reflects a wider anxiety among the global fund manager community, which has seen average cash balances rise to 4.7% in February compared with an average of 4.5% over the past 10 years.

However, BofA Merrill Lynch said this upward move is not big enough to indicate a firm move into ‘sell’ territory.

It was revealed last month that bitcoin was no longer viewed as the most crowded trade, with global fund managers instead concerned about grouping in the tech sector.

In the latest reading, Long FAANG + BAT remained the most crowded trade, and short positions on the US dollar and volatility moved into second and third place respectively.

Elsewhere, there was a sharp reversal in the number of managers buying protection for their funds. In January, protection buying had dropped to a five year low, but the latest survey revealed a record one-month jump in the net percentage of fund managers safeguarding against shocks.

In the previous survey, fewer than 50% of respondents were positioning themselves defensively to protect against an equity crash over the next three months, but that number has now fallen to less than 30%.

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