Investors’ fears of technology stocks heightened in May, cutting their allocations to the lowest level in nearly 16 years, according to a closely watched metric from Bank of America. Professional investors responding to the bank’s Global Fund Manager Survey said they had reduced technology to a net underweight of 12%, a month-on-month reduction of 23 percentage points and the shortest position since August 2006. Michael Hartnett, the bank’s chief investment strategist, noted a “major reversal” in sentiment that has led to a “extremely declining” underweight in technology this year after investors have been overweight the sector for the past 14 years. The moves come amid fears the Federal Reserve will have to hike interest rates more than expected to combat a 40-year high in inflation. Growth-oriented tech stocks are particularly sensitive to higher interest rates, as they make future earnings less attractive as capital and innovation costs rise. Current market prices suggest the Fed will raise its benchmark interest rate from the current target of 0.75% to 1% to a range of 2.75% to 3% by the end of the year, according to data from CME Group. Portfolio managers in the survey cited the broader tightening climate among global central banks as the top “tail risk” threatening yields. Recession and inflation risks followed. Other parts of the Bank of America survey reflect general concerns about the direction of the market. Cash holdings have increased to 6.1% from 5.9% in March and the highest allocation since the September 11, 2001 terrorist attacks. This coincides with a drop in global growth confidence to a net -72%, the lowest level in the survey’s history. “Investors are very long cash, commodities, healthcare, staple foods and very short technology, equities, Europe” and emerging markets, Hartnett wrote. He added that the allocation to defensive sectors is similar to what it was during the 2008 financial crisis, the European debt crisis and the early days of the Covid pandemic. The bank’s financial stability risk indicator is also at a record high. “The high perceived risk to financial market stability also points to a further decline in share prices,” Hartnett wrote. The survey ran May 6-12 and included 331 panelists with $986 billion in assets under management.
https://www.cnbc.com/2022/05/17/investor-bets-against-tech-reach-highest-point-since-2006-bank-of-america-survey-shows.html Investor bets on technology hit the highest level since 2006, a Bank of America survey shows