BAML: Investors are freaking out about the rising prospect of a global recession

new york stock exchange the great recessionDavid Karp/AP

  • Global recession is now the biggest fear for credit investors, according to a survey by Bank of America Merrill Lynch.
  • 30% of those surveyed suggested recession was their most significant worry, the highest level for a single concern since June 2017.
  • Intriguingly, investors aren't concerned by rising yields or inflationary pressures, with Brexit only concerning 2% of those surveyed.

Recessionary risks are flashing in the minds of both high grade and high yield investors with fears about growth front and center, according to a Bank of America Merrill Lynch survey.

Corporate bond markets took a tumble at the end of 2018 with volumes falling off a cliff amid market stress stemming from the US-China trade war and slowing global growth. These fears appear to have manifested themselves clearly in the minds of the 58 BAML clients surveyed, with global recession now the single largest worry in investors minds.

30% of those surveyed said that a global recession is their biggest fear, the highest proportion of survey participants naming a single issue since the summer of 2017.

Poor figures out of Europe, particularly in Italy and Germany, as well as worrying Chinese data has played on the minds of investors in recent months. Europe's largest economy, Germany, only just avoided a technical recession in 2018 with manufacturing, especially automotive, having difficulties.

Investors are also concerned with the US's soon-to-be released fourth quarter GDP numbers, which are expected to show a decline from the growth highs of the second quarter of 2018. The slowing global picture is a big problem for the US which is increasingly vulnerable to the turmoil of other economies.

"Tighter economic and financial linkages today have likely increased the risk from foreign spillovers," Goldman Sachs economists led by Jan Hatzius wrote in a recent client note.

The key to lifting Europe out of its current malaise is increased stimulus out of China, according to 40% of respondents. China's own debt issues are well documented but an improvement in the country's import data, with particular reference to German cars, for instance, could help the ailing eurozone.

Investors have clearly become fatigued by the never-ending Brexit debate with only 2% seeing it as a key concern while the apparent slowdown in the Federal Reserve's hiking agenda has led to a complete reversal in worries about rising interest rates.

BAML risk survey Investor concerns Bank of America Merrill LynchBank of America Merrill Lynch

Get the latest Bank of America stock price here.

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