XLY - Advisers love bonds cash and value stocks shun growth and gold - BofA survey

2023-03-08 13:30:03 ET

Defensiveness is in style among financial advisers, according to the BofA Securities annual Global Wealth & Investment Management Survey.

Equity allocation ( NYSEARCA: SPY ) ( QQQ ) ( DIA ) ( IWM ) fell to 57% from 62% in 2022, the lowest level in the short six-year history of the survey. This time around, 372 Merrill financial advisers from around the country responded.

Exposure to bonds ( TBT ) ( TLT ) ( SHY ) ( IEI ) ( HYG ) ( LQD ) rose 3 percentage points to 27%, the highest recorded.

"These shifts may continue: 39% said they are moving more into bonds, vs. 18% for equities, consistent with the average bond allocation from sell-side strategists hitting a 10-year high," strategist Savita Subramanian wrote in the survey note Wednesday. "We see long duration bonds (and long duration growth stocks) as risky given rate sensitivity."

Cash ( VMFXX ) ( SPAXX ) allocation rose to 10% from 7%.

"Just 26% plan to buy stocks with excess cash (v. 42% last year), while 29% plan to buy bonds," Subramanian said. "30% are happy to remain in cash. Cash return/dividend strategies are most frequently requested by clients (82%). We concur. We also prefer companies with self-funded growth (cash flow generators) to those that need to borrow to grow."

Among other highlights in the survey:

• In stocks, 78% prefer Value ( IWD ) ( VONV ) vs. 12% who like Growth ( IWF ) ( VONG ).
• Respondents are most bullish on Healthcare ( XLV ), 76% bullish, Energy ( XLE ), 73% bullish, and Financials ( XLF ), 67% bullish. They are most bearish on Consumer Discretionary ( XLY ), 51% bearish, Real Estate ( XLRE ), 44% bearish, and Info Tech ( XLK ), 37% bearish.
• Biggest tail risks cited were recession, 18%, central bank policy mistakes, 17%, and geopolitics and inflation, both at 15%. Inflation was top last year. Only 2% cited equity bubbles, down from 15%.
• With gold ( XAUUSD:CUR ) ( GLD ) ( IAU ) ( PHYS ), 71% of advisers have little or no exposure, up from 69% last year. Only 12% said they would be increasing allocation to the yellow metal.

Citi advises playing defense in a choppy near term .

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