Global fund managers turned more defensive in March: Poll

Equity markets have suffered from speculation the U.S. Federal Reserve would hike interest rates more aggressively than previously thought.

But the S&P 500 has staged a quick rebound, up 11 percent since March 8, its biggest 15-day percentage gain since June 2020 when the market was recovering from a steep sell-off near the start of the COVID-19 pandemic.

In the last month, asset managers increased their cash buffer to 4.5 percent, from 4.2 percent, the highest since November 2020.

"Our view is markets are close to pricing in our central scenario, where the Federal Reserve continues on its policy tightening cycle and in turn reduces inflation without causing a significant growth slowdown," said Craig Hoyda, senior quantitative analyst at abrdn.

"However, we view risks as skewed to the downside, with risks of a global recession within the next two years as 20 percent-30 percent."

The spread between US 2-year and 10-year Treasuries flashed signs of a recession on Tuesday when it briefly inverted before turning positive again.

This inversion, when sustained, has previously been an accurate predictor of recession.

Not all fund managers were as cautious, especially given the increase in inflation to multi-year highs in nearly every major economy.

"In an inflationary environment, equities are the only large and liquid asset class accessible to all that can generate significant real returns," said Christopher Rossbach, chief investment officer at J. Stern & Co.