As the tariff war reached an unprecedented peak last week, global financial markets experienced a dramatic upheaval.
On the 15th, Bank of America released its global fund manager survey report, which was conducted from April 4 to 10, coinciding with the most turbulent week in financial markets, capturing a sharp shift in investor sentiment. The report shows that investor confidence in the global economy has fallen to its lowest point in nearly 25 years.
Amid this pessimistic sentiment, market capital flows underwent a sharp reversal, with investors withdrawing from the stock market on an unprecedented scale, reducing global stock allocation to its lowest point since July 2023, during which U.S. stocks experienced the largest two-month decline in history.
Expectations for an economic recession have soared to the highest level in 20 years, with as many as 82% of surveyed fund managers anticipating a weakening global economy, marking a historical high in 30 years. Among them, 42% of investors believe that a global economic recession is imminent, while the probability of a &#34;hard landing&#34; has sharply risen to 49%.
The specter of stagflation is also looming, with global inflation expectations reaching their highest level since June 2021.
Most concerning is that as many as 80% of respondents view &#34;the trade war triggering a global economic recession&#34; as the biggest current &#34;tail risk,&#34; which is the highest concentration of &#34;tail risk&#34; in the 15-year history of the survey. Against this backdrop, &#34;going long on gold&#34; has replaced the &#34;long on Mag7&#34; strategy that lasted for 24 months, becoming the most crowded trade currently.
The market turmoil triggered by this tariff war may just be beginning, and its long-term impact could be more profound than many expect, as the market prepares for a more challenging macro environment.
Key charts from the Bank of America report:
<h2>Exiting Stocks, Holding Cash</h2>
<ul>
<li>Record number of investors plan to cut U.S. stock positions</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ae2407ee-8e12-4491-8413-e28bc58dfc5f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ae2407ee-8e12-4491-8413-e28bc58dfc5f.png"/>
<ul>
<li>Record outflows from U.S. stocks over two months</li>
</ul>
The allocation to U.S. stocks has dropped to a low of 36%, the lowest allocation since May 2023. Since February 25, the allocation to U.S. stocks has decreased by 53 percentage points, marking the largest decline in two months.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4d94468a-8bb3-453f-8db7-1028a5b41ee1.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4d94468a-8bb3-453f-8db7-1028a5b41ee1.png"/>
<ul>
<li>Stock allocation at the lowest since July 2023</li>
</ul>
Investor allocation to global stocks fell to a low of 17% in April, the lowest allocation since July 2023.
Since February 25, stock allocation has decreased by 52 percentage points, the largest two-month decline since April 2020.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a3019364-38ff-4a57-bdb3-53ea2056bafb.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a3019364-38ff-4a57-bdb3-53ea2056bafb.png"/>
<ul>
<li>Investor risk appetite has also fallen to a two-year low</li>
</ul>
When asked about their current risk appetite... a net 46% of investors indicated that they are taking on lower-than-normal levels of risk, the lowest level since May 2023.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e75b9d87-6c17-4cef-a8b1-50fdcc053257.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e75b9d87-6c17-4cef-a8b1-50fdcc053257.png"/>
<ul>
<li>Cash surged to 4.8%, the largest increase in nearly two months since April 2020</li>
</ul>
Bank of America FMS cash levels rose to 4.8%, an increase of 125 basis points since February 25, marking the largest two-month growth since April 2020.
The average cash level in the nine peaks before 1999 (May 2000, February 2001, October 2001, March 2003, December 2008, June 2012, October 2016, April 2016, and October 2022) was 6.2%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/665e7b97-9152-4451-ad51-7d0b703f139e.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/665e7b97-9152-4451-ad51-7d0b703f139e.png"/>
<h2>Pessimism spreads, recession expectations surge</h2>
<ul>
<li>Global FMS investor sentiment falls to the lowest level on record</li>
</ul>
The FMS sentiment measure, based on cash levels, equity allocation, and global growth expectations, dropped from 3.8 in March to 1.8 in April, the lowest level since October 2023.
The current sentiment level is the fifth lowest on record (only behind 2001, 2009, 2019, and 2022), with April's global FMS data causing the BofA bull-bear indicator to fall from 4.8 to 4.5.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f10459d3-b503-4231-b759-38d4639c931c.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/f10459d3-b503-4231-b759-38d4639c931c.png"/>
<ul>
<li>49% expect a &#34;hard landing,&#34; 37% a &#34;soft landing,&#34; and 3% &#34;no landing&#34;</li>
</ul>
Expectations for a &#34;hard landing&#34; surged to 49% in April (up from 11% in March), while expectations for a &#34;soft landing&#34; fell to 37% (down from 64%), and &#34;no landing&#34; dropped to 3% (down from 19%).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4411b004-67dd-48a3-980a-a1ac7bd5ea21.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4411b004-67dd-48a3-980a-a1ac7bd5ea21.png"/>
<ul>
<li>Global growth expectations hit a 30-year record low</li>
</ul>
Expectations for the global economy fell to a historical low in April, with 82% anticipating a slowdown in global growth.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0bbf15ab-cc16-4034-a9cd-14b5b0839b07.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0bbf15ab-cc16-4034-a9cd-14b5b0839b07.png"/>
<ul>
<li>Recession expectations rise to the highest level in the past 20 years
42% of investors expect a global economic recession, the highest level since June 2023 and the fourth highest in the past 20 years. This marks a significant shift from last month when 52% believed a recession was unlikely.</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1139d348-f9ef-4704-9ca7-f380253824d8.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1139d348-f9ef-4704-9ca7-f380253824d8.png"/>
<ul>
<li>The trade war triggering a global economic recession is seen as the biggest &#34;tail risk&#34;</li>
</ul>
According to 80% of investors, the trade war triggering a global economic recession is viewed as the biggest tail risk, representing the highest concentration of &#34;tail risk&#34; in 15 years.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e2ea9d16-2e58-4b65-ab79-8d44d97a2c8b.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e2ea9d16-2e58-4b65-ab79-8d44d97a2c8b.png"/>
<ul>
<li>Historical evolution of the global &#34;biggest tail risk&#34;</li>
</ul>
Since 2011, the main concerns of investors have included Eurozone debt, quantitative tightening, and trade wars, global coronavirus, inflation, and central bank interest rate hikes; now it is geopolitical issues, trade war 2.0, and economic recession. The biggest tail risk is &#34;the trade war triggering a global economic recession,&#34; accounting for 80%.
<h2>&#34;Long on gold&#34; is the most crowded trade, with high expectations for &#34;dollar depreciation&#34;</h2>
<ul>
<li>&#34;Long on gold&#34; is currently the most crowded trade</li>
</ul>
In terms of crowded trades, &#34;long on gold&#34; (49%) has ended the 24-month winning streak of &#34;long on mag7&#34; (49%).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1acaa83e-8355-478d-9016-96b5517cf6c3.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1acaa83e-8355-478d-9016-96b5517cf6c3.png"/>
<ul>
<li>42% believe gold will perform best in 2025</li>
</ul>
Gold is also expected to perform best in 2025, with 42% of investors (up from 23% in March) believing gold will perform best, while &#34;global equities&#34; dropped to fourth place at only 11% (down from 39% in March).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a33c7c0c-6f6a-4889-8048-e46345d5a3be.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a33c7c0c-6f6a-4889-8048-e46345d5a3be.png"/>
<ul>
<li>Gold valuation versus gold price</li>
</ul>
34% of FMS investors believe gold is overvalued (the highest in 5 months).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e7583980-6f09-48e4-b053-e227445d0d53.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e7583980-6f09-48e4-b053-e227445d0d53.png"/>
<ul>
<li>Expectations for dollar depreciation reach the highest level since May 2006</li>
</ul>
61% expect the dollar to depreciate in the next 12 months, the highest level since May 2006.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e2e28018-1ab3-4d53-a2a7-9ae087f5dec8.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e2e28018-1ab3-4d53-a2a7-9ae087f5dec8.png"/>
<ul>
<li>&#34;American Exceptionalism&#34; has peaked</li>
</ul>
According to 73% of investors, the theme of &#34;American Exceptionalism&#34; has reached its peak.
<ul>
<li>Changes in investor allocations in April</li>
</ul>
Allocations to bonds, cash, and defensive stocks (utilities, healthcare, and consumer goods) have increased, while allocations to industrials, equities, and the Eurozone have decreased.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0cd0873c-1fee-4c73-9623-6cc2c6099003.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/0cd0873c-1fee-4c73-9623-6cc2c6099003.png"/>
<ul>
<li>Historical evolution of the global FMS &#34;most crowded trades&#34;</li>
</ul>
Since 2013, from high-yield debt, long U.S. Treasuries, long quality bonds, long tech stocks, long emerging markets, long U.S. Treasuries, long U.S. tech and growth stocks, long Bitcoin, long commodities, long tech stocks, long commodities, long U.S. dollars, to long U.S. stocks Mag7.
&#34;Long gold&#34; is considered the most crowded trade (49% of investors), followed by Mag7 (24%), and long EU stocks (10%).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9ea3d453-b833-4cc6-a108-44a873b95404.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9ea3d453-b833-4cc6-a108-44a873b95404.png"/>
<h2>Is stagflation unavoidable? How many times will the Fed cut rates?</h2>
<ul>
<li>How investors describe the global economy in the next 12 months</li>
</ul>
90% of FMS investors expect &#34;stagflation&#34; (below trend growth and above trend inflation), the highest level since November 2022.
5% of investors expect &#34;stagnation&#34; (below trend growth and below trend inflation), while only 1% expect &#34;prosperity&#34; (above trend growth and above trend inflation), and 0% expect &#34;Goldilocks&#34; (above trend growth and below trend inflation).
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ac341443-20bb-4660-9470-8f7159ad0c7f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ac341443-20bb-4660-9470-8f7159ad0c7f.png"/>
<ul>
<li>Global inflation will be higher in the next 12 months</li>
</ul>
57% of investors expect global CPI to be higher in the next 12 months... the highest inflation expectations since June 2021. Inflation expectations surged by 50 percentage points month-on-month, marking the largest monthly increase since March 2022.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/19ab168b-dcff-43d6-857c-c1f372dc20aa.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/19ab168b-dcff-43d6-857c-c1f372dc20aa.png"/>
<ul>
<li>Global corporate profit growth will deteriorate</li>
</ul>
80% of investors expect global profits to deteriorate in the next 12 months, with global profit expectations declining by 91 percentage points over the past two months, reaching the lowest level since October 2022.
Investors have turned negative on the U.S. profit outlook, with 28% believing the U.S. profit outlook is pessimistic, the highest level since November 2007
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dd7e5984-9293-432f-97b1-b68f7787d9f0.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/dd7e5984-9293-432f-97b1-b68f7787d9f0.png"/>
<ul>
<li>Federal Reserve Rate Cut Expectations</li>
</ul>
Regarding the Federal Reserve rate cut expectations, 1.34% of investors expect 2 rate cuts; 25% indicate there will be 3 rate cuts; 16% indicate there will be 4 or more rate cuts; 13% indicate there will be 1 rate cut; and 9% indicate no change.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/39a9a895-ad4b-4ca5-bb81-47f0a763ad16.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/39a9a895-ad4b-4ca5-bb81-47f0a763ad16.png"/>
<ul>
<li>U.S. Tax Cuts Will Not Boost U.S. Growth in the Second Half of 2025</li>
</ul>
On the policy front, 63% of investors do not believe that U.S. tax cuts will boost U.S. growth in the second half of 2025.
<ul>
<li>China's Stimulus Measures Will Boost Growth in the Second Half of 2025</li>
</ul>
On the other hand, 63% do expect that China's economic stimulus measures will accelerate China's growth in the second half of 2025

Last week, the financial markets experienced a dramatic shift. A Bank of America survey showed that up to 82% of surveyed fund managers expect a global economic slowdown, reaching a historical high not seen in 30 years. However, this expectation has not yet been fully reflected in asset allocation, with current cash allocation at 4.8% of assets, which typically needs to rise to 6%. Global equity allocation has fallen to its lowest point since July 2023, with "going long on gold" replacing the "long on Mag7" trade that had persisted for 24 months, becoming the most crowded trade currently

- The global financial markets experienced significant turmoil as the trade war escalated, with a recent Bank of America survey revealing investor confidence in the global economy at a 25-year low.  
- A record 82% of fund managers anticipate a global economic slowdown, with 42% believing a recession is imminent, while 80% view the trade war as the biggest tail risk.  
- Amidst this pessimism, cash holdings surged to 4.8%, and "long gold" has become the most crowded trade, reflecting a shift in investor sentiment towards safer assets.

A historic week, institutions' choice: go long on gold!