Global funds still recommend bonds over stocks: Reuters poll
BENGALURU: Global fund managers are convinced the world economy is already in recession, and recommended increasing bond holdings in March to the highest level in at least seven years while buffering up on cash at the expense of equities, a Reuters poll showed.
The damage the coronavirus pandemic and oil price collapse have inflicted on global financial markets has been the fastest selloff since the crash of 1929 that led to the Great Depression.
Some $15 trillion has been wiped off world stock markets .MIWD00000PUS, the oil price has slumped 60% since Saudi Arabia and Russia started a price war and currencies in major emerging economies including Brazil, Mexico and South Africa have plummeted more than 20%.
“For once in many years, the reality of the underlying economic conditions and financial markets’ moves seem to coincide despite policy first-aid, which previously had made the pain go away instantly,” said a global chief investment officer at a large fund management company.
“The recent fall in equities reflects the wrongdoings over the past decade such as share buy-backs at a time when investment growth was warranted. With the economic hit becoming more clear from the worldwide shutdown of activity, the market moves going forward could get more distressing.”
With the U.S. Federal Reserve slashing interest rates to near zero, pumping trillions of dollars into the market and announcing unlimited and open-ended bond purchases, ultra-safe U.S. Treasuries have returned 13% so far this year.
The monthly Reuters poll of 34 fund managers around the globe taken March 16-30 showed that in the model global portfolio, bond holdings - a key gauge of investor caution - rose to their highest since the poll series started in early 2013, to 43.1% from 41.4% last month.
All 19 managers who answered a separate question about the global economy said it was already in recession, similar to economists’ assessments in another Reuters poll.
“We are experiencing an extremely rapid economic contraction which very likely will have dragged Q1 GDP into negative territory but of course the majority of the hit to GDP will come in Q2,” said Benjamin Suess, director at UBS Asset Management. – Reuters