Skip to main content

Investors are the most pessimistic this year amid credit crunch, recession fears

Fund managers surveyed by Bank of America are increasingly pessimistic about the U.S. economy following the collapse of several banks earlier this spring.

Investor pessimism surged to the highest level this year in May amid fears over a looming recession and the threat of a credit crunch for U.S. consumers and businesses, according to Bank of America's global fund manager survey. 

Fund managers' optimism has tumbled 28 percentage points since February, the largest two-month decline since last April – shortly after Russia invaded Ukraine. About two-thirds of investors – roughly 65% – are bracing for a weaker economy over the next year, the highest since December. 

Despite concerns over a weaker economy, a majority of investors see a soft landing as the most likely outcome for global economic growth and expect just a small contraction in earnings. At the same time, nearly half of investors project a recession in the next 12 months.

MORGAN STANLEY WARNS STOCK MARKET IS STILL 'FAR FROM OUT OF THE WOODS'

It marked the most bearish survey of 2023.

About 33% of participants in the survey identified the bank credit crunch and a global recession as the top risk to markets. That compares to about 29% who highlighted sticky inflation that keeps central banks on a hawkish trajectory as the biggest threat.

Another 15% are worried about geopolitics – such as the war in Ukraine or tensions between China and Taiwan – worsening, while 12% think the biggest threat is a systemic credit event. Just 8% of respondents identified the looming debt ceiling deadline as the biggest tailwind to global economic growth. 

BANKING CRISIS THREATENS TO IGNITE CREDIT CRUNCH FOR US HOUSEHOLDS - WHAT TO KNOW

The clock is running out for lawmakers to lift the debt limit: Treasury Secretary Janet Yellen warned earlier in May the country could run out of money as early as June 1 if the ceiling is not raised.

The BofA survey comes amid a prolonged standoff over the debt limit. Republicans, who control the House, passed a bill that raises the borrowing limit, and also includes budget cuts. In turn, President Biden and his fellow Democrats, who control the Senate, have insisted on a "clean" debt ceiling bill and will negotiate any spending cuts separately.

CLICK HERE TO READ MORE ON FOX BUSINESS

Although an overwhelming share of investors – about 71% – expect a debt ceiling resolution ahead of the so-called X-date, that is a marked drop from 80% who anticipated a deal in April.

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.