Fund managers, those employees of large institutions such as pension funds or insurance companies are not a happy bunch right now.

Optimism amongst these all-knowing financial gurus has cratered to what the Times describes as an ‘all-time low’.

You might think it was all Russia’s fault – but as it turns out, the Ukraine war, as bad as it is –  is listed as only the fourth biggest concern amongst global fund managers.

According to this month’s Bank of America global fund manager survey – 71 per cent of respondents were pessimistic about the prospects for global growth in the months ahead. This is the worst pessimism score since the survey began recording such things back in the early 1990s.

And as we rightly pointed out last month, ahead of these managers’ sentiments right now – high inflation and low growth will lead to ‘stagflation’. In fact, stagflation is now being predicted by 66 per cent of fund managers – worse than the peak of the financial crisis in 2008! Not only that but fund managers are also reducing their cash holdings by about 7 per cent from 5.5 to 5.9 per cent – a sure sign that cash is not the place to be.

The reality is that in a post-pandemic world that is still suffering the effects of it – a global recession is on the way after the initial bounce-back.

Reuters reports that – “The Russia-Ukraine conflict has receded to fourth place, after aggressive central bank interest rate actions – and inflation. Participants expect the US Federal Reserve to raise interest rates by as many as seven times in the current cycle but a majority expect inflation to soften over the next 12 months.”

One has to be careful with inflation, just because it falls back does not mean to say things get cheaper – they are just cheaper than when it was already rising. Higher prices for many goods, especially energy may well fall back from record highs but the expectation is that they will remain high compared to the last twenty-year average.

That same report also stated that – “The European edition of the survey found investors continuing to cut their European growth projections, with a net 81% of survey respondents expecting the region’s economy to weaken over the coming year compared with 69% in the March edition.”

Stock market allocations, that is to say – where’s the money going – investors were most bullish on US equities, while unfortunately European and UK equities were the top bearish bets – i.e. the least fancied. This also ties in with the fact that fund managers thought global profit expectations deteriorated to their weakest levels since the middle of the pandemic.

The survey was conducted in the first week of April with 292 participant fund managers with $833 billion of assets under management responding to the survey.