Investor Sentiment Hits 30-Year Low as Recession Fears Rise

Investor confidence is nearing historic lows, with sentiment levels in April falling to the most bearish reading in three decades, according to the latest BofA Global Fund Manager Survey (FMS). The survey reflects a wave of pessimism that has reshaped asset allocation strategies across global markets.

Key Findings from the April FMS

• 82% of respondents expect global growth to weaken — the worst reading in the survey's 30-year history.

• 42% see a recession as likely.

• 49% expect a “hard landing”, up sharply from 11% last month.

• Cash holdings surged to 4.8%, marking the biggest 2-month spike since the 2020 COVID crash.

• U.S. equities saw a record 53 percentage point drop in allocation since late February, leaving investors 36% net underweight.

Peak Fear, But Not Yet Maximum Panic

BofA strategists, led by Michael Hartnett, described this as the “5th most bearish FMS in the past 25 years.” The bank's sentiment index dropped to 1.8, its lowest since October 2023, suggesting we are approaching what they call "peak fear."

While macroeconomic expectations are grim, market positioning hasn't entirely followed suit — a sign that investors may be hedging but not exiting risk assets completely.

“U.S. Exceptionalism” in Question

Perhaps most notably, the survey reveals a growing loss of faith in U.S. economic leadership:

• 73% of fund managers believe “U.S. exceptionalism” has peaked.

• Bearish sentiment toward U.S. corporate profits and the U.S. dollar is at its highest since 2007 and 2006, respectively.

Shift in Portfolio Allocations

With risk-off sentiment climbing, fund managers are rotating capital toward defensive positions:

Overweight sectors:

• Bonds

• Utilities

• Consumer staples

• Pharma

Underweight sectors:

• Cyclicals

• Industrials

• Technology

The “long gold” trade has now replaced the long-standing “long Magnificent 7” tech trade as the most crowded position — another sign of rising caution.

Track the Real-Time Impact

Use these tools to follow market shifts amid this bearish environment:

• Ratios (TTM) - Monitor key valuation metrics as sentiment pressures corporate fundamentals.

• Economics Calendar - Stay ahead of critical data releases that could shift market narratives.

Final Word

With sentiment at a three-decade low and positioning swinging toward defense, markets may be bracing for more turbulence ahead. Whether this marks a bottoming-out moment or the early stages of a deeper correction remains to be seen — but for now, caution is clearly in control.