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Bearish investors turn their back on tech stocks, survey finds

By Abigail Townsend

Date: Tuesday 13 Nov 2018

Bearish investors turn their back on tech stocks, survey finds

(Sharecast News) - Exposure to the global technology sector is at its lowest level since February 2009, according the industry research, as bearish fund managers become increasingly risk averse.
The Bank of America Merrill Lynch Fund Manager Survey for November found that 44% of respondents expected global growth to decelerate in the next 12 months, up on last month's 38% and the worst outlook since November 2008.

Around 11% expect a global recession in 2019.

Reasons for the bearish stance include fears of a slowdown in China - 54% said they expected the powerhouse economy to stall in 2019 - and record levels of corporate leverage, which BofAML said "continues to point to further underperformance for equities ahead".

The survey found that cash balances had dropped from 5.1% to 4.7% as investors sought to benefit from a correction across markets in October.

Technology stocks were not favoured during the rotation, however. BofAML said: "Allocation to [the] global tech sector collapsed to [the] lowest level since February 2009." Instead, fund managers bought more defensive stocks such as healthcare and utilities.

The booming technology sector has been one of the biggest stock market winners in recent years, led by the so-called FAANG stocks of Facebook, Amazon, Apple, Netflix and Google-parent Alphabet. It now accounts for around 20% of the market value of the S&P 500.

But the sector has endured a bumpier ride in 2018, has it faces down global trade tensions, the prospect of higher taxes and greater regulation and rising interest rates. There have also been weaker-than-expected individual corporate performances.

Of those surveyed, 45% said they expected the best performing assets in 2019 to be non-US equities - though 17% said they believed the S&P 500 would be still perform well - while the worst performers were predicted to be corporate and government bonds.

BofAML surveyed 225 panellists between 2 and 8 November with a total of $641bn of assets under management.

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