Stock markets may be rallying but investors remain unconvinced, with Bank of America’s latest fund manager survey the most bearish of 2023.

Cash levels remain elevated at 5.5 per cent. A large majority are taking lower-than-normal risk levels, with risk appetite comparable to levels seen in March 2022. Equity allocations are two standard deviations below long-term norms. In contrast, investors are loading up on bonds, so much so equity allocations relative to bonds have fallen to their lowest level since March 2009, at the height of the global financial crisis.

BofA’s survey is a contrarian indicator, with uber-bearish sentiment viewed as potentially bullish for stocks. BofA’s Michael Hartnett has been wary about stocks for some time, but he acknowledges bearish positioning is still a “big contrarian support for risk assets”.

BofA’s Bull and Bear indicator has fallen to 2.3, just shy of the 2.0 level that triggers a buy signal for global equities. What this means is fund managers may reverse course and start buying if the “consensus lust for recession” is not immediately satisfied in the second quarter. Stocks have been climbing the proverbial wall of worry in 2023. The pain trade is still up for risky assets.