(Reuters) – Barclays (LON.) Wednesday’s global mutual funds investor said that they may sell stocks worth an additional $350billion this year. This is unless there are fewer fears of recession due to a uncertain macro environment and tightened monetary policy.

In the face of increasing inflation, investors have sold equities to fund higher interest rates. Russia’s invasion in Ukraine caused inflationary pressures, as well as a rise in commodity and energy prices. This increased costs for companies. It also hurt their valuations.

Barclays stated that equity outflows averaged 2.6% of mutual funds assets under management (AUM), during previous periods of stock sell-offs like the Great Financial Crisis in 2008-09, and 0.3% this fiscal year. If recession fears are not diminished, this implies that another $350 billion worth of equity sales is likely this year.

Barclays reported that mutual fund investors were net sellers this month of equity for the first-time since August 2020. However, equity outflows have been small compared with the $1.3 trillion record inflows from 2020.

The brokerage stated that both economic momentum as well as EPS revisions momentum had turned negative. This suggests that the direction of travel will likely be towards equity outflows. However, the magnitude is still unclear.

Barclays thinks the consumer outlook will not improve if the U.S. Federal Reserve becomes more aggressive in monetary policy. However, income and fundamentals are supportive at the moment.

On Tuesday, nervousness about a global economic recession was heightened by the weak U.S. data on the housing market. The U.S. Federal Reserve pledged to take aggressive action by increasing the cost of borrowing as well as minutes from the most recent meeting.

Given higher valuations, the brokerage believes that the U.S. is more susceptible to equity selling than Europe.

(The story has been corrected to Wednesday, Friday from Friday as per paragraph 1.