Investor allocations to stocks versus bonds have dropped to the lowest level since the financial crisis amid fears of a coming recession, Bank of America says

  • BofA’s fund manager survey indicates investors are pivoting away from stocks to bonds.
  • Bond allocations were lifted to a net 10% overweight on concerns of a recession and credit crunch.
  • Meanwhile, a net 63% of fund managers now expect a weaker economy.

Investors are shifting to bonds more than stocks on a relative basis by the most since the Great Financial Crisis, according to Bank of America’s global fund manager survey.

Bond allocations were lifted in April to a net 10% overweight, the survey said according to Bloomberg, hitting the highest level since March 2009. Additionally, cash allocation has stayed over 5% for 17 months — second to levels seen in the dot-com bear market. 

A global recession and credit crunch are the biggest risks to financial markets, participants said, along with sticky inflation that’ll keep the Federal Reserve raising borrowing costs.

In the most bearish reading since December 2022, a net 63% of those who were surveyed now expect a weaker economy.

BofA’s survey, which polled 249 participants with $641 billion in assets under management, also found that managers were the most overweight defensive stocks versus cyclicals since October. 

Still, they also said the most crowded trade was bets that big tech stocks would rally, followed by bets against US banks stocks.

But if the “consensus lust for recession” isn’t satisfied in the next quarter, BofA strategist Michael Hartnett said that markets will face the “pain trade” where bank stocks and bond yields both rally.

This is the fist BofA survey since turmoil in the banking sector began in March, with the closures of Silicon Valley Bank, Signature, and Silvergate. Overseas, UBS bought up rival Credit Suisse on mounting concerns over the Swiss lender’s health.