The Strategist

U.S. investors cut risky assets due to crisis

07/20/2022 - 03:42

In response to the financial crisis and in anticipation of bleak economic prospects, investors are exiting riskier assets, according to the Bank of America’s study.

According to Bloomberg, who cites the Bank of America (BofA) study, investors are choosing to give up risky assets in light of the global crisis, U.S. inflation, and recession risk. The survey was attended by 259 responders, with a $722 billion total capital, and was held from July 8 to July 15.

Market participants' anticipation of a recession is at its highest level since the pandemic in May 2020. Equity holdings by investors decreased to levels last seen in October 2008, while cash holdings grew to their highest point since 2001. 58% of investment fund managers reported being more risk adverse than usual, breaking the previous survey high set during the global financial crisis.
According to Bloomberg, the unprecedented investor withdrawal from assets has caused the market to trend downward, and European stocks have had their worst six-month slump since 2008. This, according to analysts, is a signal for short-term investing.

After experiencing its worst first half since 1970, the S&P 500 Index is up 0.9 percent, but this year's high trading volume has increased market volatility. The S&P 500 is approaching its most volatile year since the financial crisis.