The most widely followed investor survey showed a huge “crash” in bullish sentiment for stocks this month. The change was one of the most significant drops in the past 24 years. According to the Bank of America’s Global Fund Manager Survey, overall investor sentiment has declined since March 2020.
Stocks plummeted as the U.S. dealt with the COVID-19 pandemic. Investment strategist Michael Hartnett called the situation a “bull crash” in sentiment. The sentiment index includes equity allocation, cash holdings, and economic growth expectations.
This March saw the largest reduction in investors’ exposure to U.S. equities among major investors on record. At the same time, cash holdings increased significantly, similar to the levels seen during the market sell-off in March 2020 due to the pandemic.
Investor sentiment hits historic lows
The survey also showed the second-biggest decline in global growth expectations. Hartnett noted that this global growth outlook has closely matched S&P 500 performance.
This could mean potential negative news for stocks. However, Hartnett pointed out that the fast drop in sentiment could suggest that the worst of the recent decline might be over. However, he warned that the current positioning in the survey does not yet reflect an “extreme bear” environment.
It is not a scenario where investors should adopt a “close-your-eyes-and-buy” approach. Bank of America’s March survey comes as investors wonder what lies ahead for U.S. stocks. Fears about tariffs and slowing economic growth triggered a swift decline from all-time highs.
As of Tuesday, the S&P 500 struggled to stay out of correction territory. This means a drop of at least 10% from a recent high.
Image Credits: Photo by Gabrielle Henderson on Unsplash
