Only 2 per cent of investors surveyed expect a recession this year; the consensus is for Q1 of 2020, though investors are split between 2019 (41 per cent) and 2020 (43 per cent), said the Bank of America Merrill Lynch (BofAML) in its May Fund Manager Survey.

Highlights include:

•    Average cash balance ticks down to 4.9 per cent in May, from 5.0 per cent in April, but still above the 10-year average of 4.5 per cent

•    The Global FMS Macro Indicator falls for the sixth straight month, sliding into negative territory for the first time since November 2016

•    Expectations for faster global growth continue to fall, with just net 1 per cent of investors indicating they think the global economy will strengthen over the next 12 months; this is the lowest level since February 2016

•    Higher inflation remains the consensus view, with net 79 per cent of investors surveyed expecting core CPI to rise over the next 12 months

•    Allocation to commodities stays at net 6 per cent overweight, the highest since April 2012 when WTI was $105/bbl

•    The threat of a Fed/ECB hawkish policy mistake (30 per cent) returns to the top of the list of biggest tail risks to the market as trade war concerns (25 per cent) ease; the top three are rounded out by concerns over geopolitics causing oil to reach $100/bbl (12 per cent)

•    “Long FAANG+BAT” remains the most crowded trade for the fourth straight month (29 per cent); “Short US Treasuries” and “Short USD” make up the top three, each at 17 per cent

•    In May, global investors favour banks, tech and energy, while avoiding staples, telecoms and utilities; the relative overweight banks vs. underweight utilities is now an FMS record

•    Allocation to banks rises to net 36 per cent overweight, the second highest level on record

•    In a new survey section on ETFs, 53 per cent of respondents say they actively use ETFs in their portfolio

•    ETF investing remains predominantly an equity-focused activity for fund managers, with 77 per cent of survey participants indicating they use them to gain equity market exposure, as compared to just 8 per cent for corporate bonds and 5 per cent for government bonds

“This month’s survey presents good and bad news,” said Michael Hartnett, chief investment strategist. “Although cash levels remain high and growth optimism is at the lowest level in over two years, a majority of investors say there is room to grow in this equity bull market and don’t see signs of recession anytime soon. Fund managers think the May rally can extend in the near-term.” – TradeArabia News Service