Cash levels jump to highest since 9/11 terrorist attacks: BoFA survey

Stocks may be recovering from their March lows, but investor pessimism over the pandemic’s economic damage is at “extreme” levels with cash positions the highest since the 9/11 terrorist attacks, according to a Bank of America survey.

Fund managers have shunned risk, with equity allocations the lowest since the 2009 financial crisis, the poll conducted between April 1 and April 7 shows. Cash levels surged to 5.9 per cent from 5.1 per cent in March, signalling peak pessimism to BofA strategists.

Global equities have rallied more than 20 per cent from their March lows on optimism over fiscal and monetary stimulus in addition to a slowing in new virus cases in key infection hotspots, such as New York and Spain. However, many market players remain hesitant to call the bottom of the sell-off as the full economic impact of lockdowns is yet to be revealed.

Even though such elevated cash levels set off BofA’s buy signal for risk assets, the strategists led by Michael Hartnett recommend taking profit on the S&P 500 at 2,850 to 3,000 points — levels as much as 8.6 per cent higher than Monday’s close. An overwhelming, record-high 93 per cent of surveyed fund managers expect a recession in the next 12 months.