Fund managers are the most underweight on technology stocks in almost 16 years as they brace for aggressive Federal Reserve policy tightening, the latest Bank of America Corp. survey shows.
Net allocation to the tech sector fell to the lowest since August 2006, according to the poll conducted from Feb. 4-10. Most of the participants sent their responses before Thursday’s red-hot U.S. inflation print that prompted investors to price in about seven Fed rate hikes in 2022.
Nervous investors have been rapidly reducing their bets on growth stocks that fueled the S&P 500’s rally over the last decade as central bankers prepare to tackle inflation. Higher interest rates hurt pricier tech stocks that are valued on future growth expectations.
While long U.S. tech remained the most crowded trade in the survey -- a trend that’s persisted for more than two years -- conviction is on the wane, at 28% in February compared with last month’s 39%.
BofA strategists led by Michael Hartnett said overall equity allocation has dropped sharply, with just under a third of its clients bullish on stocks, down from more than half of them in January. Meanwhile, cash was voted as the most preferred asset class with 38% net allocation.
Hawkish central banks were seen as the biggest tail risk for a third straight month, followed by inflation and asset bubbles. The ongoing Russia-Ukraine conflict came in at fifth.
Investors now say they expect a “Fed put” -- supportive measures from the central bank when markets turn south -- only after the S&P 500 Index falls to 3,700. The index closed Monday at 4,400.
A total of 314 fund managers with $1 trillion in assets under management took part in the global survey.
This article was provided by Bloomberg News.