FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) near the close of market in New York, U.S., October 31, 2018. REUTERS/Brendan McDermid
(Reuters) – Global investors’ equity allocations fell 6 percentage points in May and over a third of fund managers have taken out protection against sharp stock market falls in coming months, Bank of America Merrill Lynch’s latest monthly survey found.
The proportion of investors preparing for equity falls is at the highest in the survey’s history, BAML said on Tuesday, noting that trade war was identified as the main tail risk by 37% of participants, followed by a Chinese slowdown.
“(Investors) are well-hedged but not positioned for a breakdown in trade talks,” Michael Hartnett, chief investment strategist told clients.
“Investors see little reason to ‘buy in May’ unless the 3Cs – credit, the consumer, and China – quickly surprise to the upside.”
The survey found the overall net equity overweight had dropped to just 11%, while a net 34% were underweight bonds, the highest in seven years. Emerging markets were the most preferred equity class while the UK was least favorite.
U.S. tech stocks were named the most crowded trade, followed by short European equities and long U.S. dollar.
The poll, conducted May 3-9, surveyed 250 panelists with $687 billion in assets.
Reporting by Sujata Rao, editing by Karin Strohecker