Investor bets against tech reach highest point since 2006, Bank of America survey shows
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According to an closely monitored Bank of America gauge, investors have become more afraid of tech stocks and have slashed their allocations to the lowest point in almost 16 years. According to the Global Fund Manager Survey, professional investors indicated that technology had been reduced to a net 12 percent underweight. This is a 23-point drop on August 2006 and the lowest position since August 2006. Michael Hartnett was the chief investment strategist at the bank. He noted that there had been a significant shift in sentiment. This year, tech has fallen to an “extremely negative” weight after being overweight by investors for 14 years. These moves are being made amid concerns that the Federal Reserve may have to increase interest rates to counter a 40 year high inflation. Higher rates are especially important for tech stocks that focus on growth as higher interest rates make future earnings less appealing as innovation costs rise and capital becomes more expensive. According to CME Group data, current market pricing suggests that the Fed will increase its benchmark borrowing rate from the current target range of 0.75%-1.5% by year’s end to 2.75%-3.3%. According to the survey, portfolio managers identified the “tail risk” of a tightening global central bank environment as one of the most dangerous returns. This was followed closely by risks of inflation and recession. The survey also reveals broad concerns about the direction of the market in other parts. As a result, cash levels are now at 6.1%. That’s an increase from 5.9% in March. It is also the highest level since the September 11th 2001 terror attacks. Global growth optimism fell to a net 72% in March, marking the lowest point ever recorded. Hartnett stated that investors are extremely long on cash, commodities and healthcare and staples and short on tech, equities and Europe. He said the ratio of defensive sector allocations is comparable to what investors had been during 2008’s financial crisis. This was also the time when the European debt crisis occurred and before the Covid pandemic. Record highs have also been set by the Financial Markets Stability Risks indicator of the bank. Hartnett said that there is a high risk of instability in the financial markets, which could lead to further equity price declines. It included 331 respondents with assets totalling $986 billion.
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