Market crash brings back 2008 memories, cash is king: BofA

The rapid-fire selloff in stock markets and dire economic forecasts due to the coronavirus have rattled investors and spurred a dash for cash, a BofA fund manager survey showed on Tuesday. Cash holdings in March surged to an average 5.1%, just shy of the 5.5% seen during the 2008 financial crisis, as equity allocations were in a record collapse, mainly led by Eurozone and emerging markets, the survey showed.

World stocks have lost nearly a third or $21 trillion in value since mid-February as the epicenter of the virus shifted from China to Europe. BofA said the worries triggered a slump in global growth expectations which saw their biggest drop ever in the bank’s 26-year poll history.

Investors managing $516 billion said the virus was seen as the biggest “tail risk” for markets. The “most crowded” trade was in long U.S. Treasuries, a safe-haven. The survey conducted between March 6-12 also found that BofA’s “Bull & Bear Indicator”, a sentiment index, had collapsed to 1.7 from 2.5 in February, generating a contrarian “buy signal” for risk assets for the first time since August.

Investment in banking stocks was at its lowest level since July 2016, while investment in the defensive sectors of healthcare and utilities was at its highest level since early 2009.

Market crash brings back 2008 memories, cash is king: BofA, Reuters, Mar 17