In one rather dark internet meme, a bulgy-eyed cartoon dog wearing a small hat sits sipping from a mug at a table, surrounded by encroaching flames. “This is fine,” it says to itself. Financial markets have a similar ring to them now — investors know something is wrong, but they are carrying on regardless.
The monthly survey of fund managers compiled by Bank of America is always a useful way to test the mood. April’s update reflects the canine’s situation rather neatly.
Some 71 per cent of investors are expecting a weaker economy over the next 12 months, the survey showed. It’s the most pessimistic reading ever on data going back to 1995 — not even March 2020 and the financial crisis of 2008 match it. A clear majority of investors — 64 per cent — expect the benchmark S&P 500 index of US stocks to drop below 4,000, a 10 per cent fall from current levels, before it cracks above 5,000.