The fund manager’s June survey by Bank of America (BofA) “indicates deeper investor misery” as the S&P 500 plunged into a bear market amid fears of aggressive rate increases from the Federal Reserve.
Bank of America stated that “Wall Street sentiment is terrible but there is no big drop in equities before the big rise in yields and inflation,” “the latter requiring hawkish Fed increases in June and July.”
Optimism about global growth fell to a new low in June, and the percentage of fund managers expecting a stronger economy 73% from May fell to its lowest level since 1994.
Global earnings forecasts fell to their lowest level since September 2008, during the Great Recession. The survey indicated that the highest “tail risk” for stocks is the Fed’s tightening, while fund managers are largely the long cash and defensive sectors like health care.
Monday’s market action highlighted the general gloom.
US stocks sank into a bear market on Monday, with the Standard & Poor’s index ending the session more than 20% below its last record high set in January. The clear catalyst for the sell-off was a rise in the Consumer Price Index (CPI) on Friday which sparked fresh interest rate hike concerns.
The Nasdaq Composite Index is down 4.7% during the session, ending at its lowest level since September 2020. The S&P 500 Index is down 3.9%.
Treasury yields hit their highest levels since 2011, weighing heavily on risky tech names like Apple and Amazon.
Bitcoin prices have also fallen below $23,000 in the broader journey toward safety, while stocks of crypto-focused stocks like Coinbase and Microstrategy have been battered.
Investors’ fears escalated further after trading closed on a Wall Street Journal report that the Federal Reserve will raise interest rates by 75 basis points at its meeting on Wednesday.
“This is not what we expected, not what we believe is optimal policy and, separately, not good for the markets,” Krishna Guha, a strategist at Evercore ISI wrote in a note to clients.
Brian Suzy He is a traveling editor and Announcer at Yahoo Finance. Follow Suzy on Twitter Tweet embed and on LinkedIn.
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