The June Fund Manager Survey by Bank of America (BofA) "signals deeper investor misery" as the S&P 500 fell into a bear market amid fears of aggressive interest rate increases from the Federal Reserve.
"Wall St sentiment is dire but no big low in stocks before big high in yields & inflation," BofA stated, "and the latter requires uber-hawkish Fed hikes in June & July."
Optimism on global growth fell to a new low in June, with the net percentage of fund managers expecting a stronger economy — meaning the difference between those expecting a stronger economic minus those expecting a weaker economy — hitting -73% this month, the lowest since 1994.
Global profit expectations also fell to their weakest since September 2008 during the Great Recession, with a net -72% of respondents expecting profits to improve. The top "tail risk" for stocks is a more hawkish Federal Reserve, the survey indicated, while fund managers are largely long cash and defensive sectors such as healthcare.
Monday's market action underscored the general gloom.
U.S. stocks sank into a bear market on Monday, with the S&P ending the session more than 20% below its recent record high in January. The apparent catalyst for the sell-off was a surprisingly hot Consumer Price Index (CPI) on Friday that stoked fresh rate hike fears.
The Nasdaq Composite fell 4.7% on the session, ending at its lowest level since September 2020. The S&P 500 dropped 3.9%.
Treasury yields hit their highest levels since 2011, which weighed heavily on perceived risky tech names such as Apple and Amazon.
Bitcoin prices also tanked below $23,000 in the broader flight to safety while shares of crypto-centric stocks such as Coinbase and Microstrategy were hammered.
Investor concerns were only ratcheted up further after the close of trading on a WSJ report that the Fed would lift rates by 75 basis points at its Wednesday meeting.
"This is not what we anticipated, not what we think is optimal policy, and, separately, not in our view good for markets," Evercore ISI strategist Krishna Guha wrote in a note to clients.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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