Global fund managers hoard cash at 9/11 levels amid stagflation fears

Some 77% of fund managers expect slow growth and high inflation, survey finds

Nervous global investors have built up cash levels last seen in the aftermath of the September 2001 terrorist attacks, amid growing fears about the twin risks of low growth and high inflation, according to Bank of America’s latest monthly fund manager survey.

The US banking group described the latest outcome of its keenly followed investors survey as “extremely bearish”, with money managers viewing hawkish central banks, intent on winding down stimulus programmes and raising interest rates to combat inflation, as the biggest risk to the global economy.

The threat of a global recession is the second-highest risk, according to money managers, responsible for $872 billion (€828 billion) of assets under management, that took part in the survey.

Some 77 per cent of fund managers now expect "stagflation", a toxic combination of slow growth and high inflation, to set in within 12 months, Bank of America said. The read was up from 66 per cent a month earlier and represents the highest level of pessimism on this front since 2008.


Cash levels across the funds surveyed rose to 6.1 per cent, the highest in more than 20 years, from 5.5 per cent a month earlier.

Markets slump

The results come as global equity markets, measured by the MSCI All Country World Index, have slumped by almost 17 per cent so far this year, led by technology stocks, with the Nasdaq having plunged more than 26 per cent since the end of 2021.

While Bank of America strategist Michael Hartnett said investors believed stocks may be prone to an imminent "bear rally", equities have yet to hit their ultimate lows.

With investors expecting more rate hikes from the Federal Reserve, the market isn't yet at "full capitulation", Mr Hartnett said.

The Fed has pushed through 0.75 percentage points of rate increases since March and is widely forecast to add a similar amount to the official cost of borrowing in the coming months. The European Central Bank (ECB) has also signalled recently that its governing council will increase rates in July for the first time in more than a decade.

Euro zone inflation was running at 7.5 per cent in April, fuelled by soaring energy costs amid the Ukraine war and international supply constraints caused by the pandemic. That's almost four times the ECB's 2 per cent inflation target.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times