From observation, 2019 so far has been dominated by talks of the 'next recession' and the subsequent and inevitable market crash to follow. With all the US–China trade war/tariff tensions, lowering interest rates, negative bond yields and the simple fact that we haven't had a downturn in more than 10 years now (way above average) – many retail investors are, it's safe to say, extremely worried about the near-term future of the markets.
Well apparently, they aren't alone. As reported by the Australian Financial Review, a Bank of America Merrill Lynch survey has found that global fund managers are more worried about the prospect of a recession over the next year than at anytime in the last decade.
The survey notes that amongst 'sophisticated investors' (read: really rich people and fund managers), there remains a strong preference for cash, bonds and shares of utilities and other consumer staples – all assets that usually outperform in low-growth/low-rate environments – over growth investments.
Although other investments may be looking cheap, there is no detectable shift towards value assets that would indicate a return of bullish sentiment.
Why are the rich so worried?
Top of the list of concerns bothering these sophisticated investors is the trade war. According to Bank of America's survey, 38% of those asked said that the US–China stand-off is 'the new normal' while only 30% believed it would be resolved by the next US presidential election in 2020.
The perceived impotence of monetary policy going forward, as well as a potential 'bond market bubble', were noted as two other areas of concern.
What does this mean for the ASX?
Well, I always take reports like this with a grain of salt. In every year I personally have been investing, there are always people telling anyone who will listen about the impending doom we are about to see. Many investors thought the market was overvalued in 2015 and went to cash, only to miss out on the last four years of bullish growth.
There are always perma-bears out there shouting about a falling sky. Although I do think we are overdue for a market crash/recession, a better way for most people is to keep some cash on the side and just be confident in the quality of your portfolio's companies, rather than attempting to 'time' markets. As history has always proved, it usually works out ok.
