Investors remain in sceptical mood, with Bank of America’s (BofA) latest fund manager survey showing sentiment deteriorating to the most bearish levels of 2023. Economic pessimism is at its highest level this year. Investor risk appetite is the lowest since November. Cash levels, already high, rose again in May, while bond allocations have hit their highest level in 14 years.

Investors are especially wary of US stocks, with allocations almost two standard deviations below normal.

However, investor bearishness is not at extreme levels. Equity allocations have actually been “creeping higher” and are now at five-month highs. Almost two-thirds of investors expect a soft landing; only a quarter expect a hard landing. Investors anticipate a mild profits recession, with global earnings expected to fall by 1 per cent over the next year.

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BofA’s survey is a contrarian indicator, so bearish sentiment is typically seen as bullish for stocks. May’s survey suggests stocks are vulnerable if a hard landing ensues, but continued investor wariness means risky assets should be “resilient”, says BofA, “so long as the landing is soft”.