Bank of America's March fund manager survey reveals a sharp deterioration in investor sentiment, with the BofA investment sentiment index collapsing from 8.2 to 5.6 in a single month—a drop from what the bank characterized as "near euphoria" to neutral market conditions. The survey encompasses portfolio managers controlling more than $529 billion in assets.
Cash positions surged to 4.3% of portfolios from 3.4%, marking the steepest monthly increase since March 2020, signaling that institutional investors are retreating to defensive positions. Simultaneously, optimism regarding global economic growth collapsed, with bullish forecasters declining from 39% to just 7% of respondents. Despite this pessimism, only 5% of investors expect a hard landing, with most still betting on a soft landing or continued expansion—a disconnect suggesting investors are hedging tail risks without fully pricing in recession scenarios.
Geopolitical concerns now dominate investor fears, cited by 37% of respondents, surpassing inflation worries at 23% and private credit risks at 16%. Notably, 63% believe the next systemic crisis will emerge from private investments and lending markets. Expectations for central bank rate cuts have weakened significantly, with only 17% of managers anticipating rate reductions over the next year—the lowest reading since February 2023.
Capital flows are rotating away from U.S. equities and the dollar toward emerging markets and commodities. The most crowded trades are now long positions in gold and semiconductors, both at 35% crowding levels, while enthusiasm around major U.S. technology companies has cooled considerably.