Synopsis:

BofA's March Global Fund Manager Survey (FMS) reveals one of the biggest sentiment shifts in history, driven by stagflation fears, trade war risks, and the end of US exceptionalism. The survey shows the second-largest drop in global growth expectations ever, the biggest decline in US equity allocation on record, and the largest jump in cash holdings since March 2020. While sentiment suggests a market bottoming process, fund managers are not yet fully positioned for recession or extreme bearishness.

Key Findings:

1️⃣ Massive Growth Expectation Collapse 📉

• 2nd largest drop ever in global growth expectations.

2️⃣ Record Sell-Off in US Equities 📊

• Biggest decline in US equity allocation on record.

3️⃣ Cash Holdings Spike to Crisis Levels 💵

• Biggest jump in cash positioning since March 2020.
• Reflects defensive positioning amid rising uncertainty.

4️⃣ Bearish Sentiment, But Not at Capitulation Levels 🔄

• No extreme long positions in recession hedges (bonds, defensive assets).
• Positioning is cautious but not at full “panic sell” levels.

5️⃣ Key Market Implications for S&P 500 (SPX) 🏛️

• SPX >6,000 requires easing inflation and trade war concerns.
• SPX <5,000 likely in a full recession scenario.

Conclusion:

BofA’s March FMS shows a sharp deterioration in risk appetite, with fund managers aggressively cutting equities and boosting cash holdings. However, positioning is defensive but not at full-blown bear market extremes. The next market move depends on inflation and trade war developments, with SPX needing a reversal in macro risks to push above 6,000, while a recession would drive it below 5,000.