Stock Pickers on Wall Street Are Going All-In on Recession Bets

As Wall Street economists and central bankers debate if and when the US economy will slip into a recession, big money managers aren’t waiting to find out.

Increasingly, professional stock pickers are shifting money out of economically sensitive shares like banks while parking it in stocks seen as resilient during economic downturns, such as utilities and consumer staples.

Hedge funds that make both bullish and bearish wagers have cut their cyclical holdings versus defensive equities to the lowest level since at least 2012, data compiled by Bank of America Corp. show. For long-only managers, their relative exposure to cyclical companies — whose fortunes hinge on the ebbs and flows of the business cycle — is near the lowest level since 2008.

It all highlights growing pessimism in the world of active investing, despite a rally that has added $5 trillion in equity values since the market’s October low.

All told, active stock pickers are “positioned for a 2009-style recession,” BofA strategists led by Savita Subramanian wrote in a note.

Source: BofA

The S&P 500 swung between gains and losses during Monday before closing little changed. For a second straight session, the index came within 30 points of the widely watched 4,200 level but failed to push through.