Fund Managers Take The Warren Buffet Route Even As Retail Investors Pump In Nearly $70 Billion Into US Stocks

The confidence of global fund managers took a hit amid tariff threats and economic uncertainty, while retail investors capitalized on ‘buy the dip’ sentiment.

What Happened: Bank of America’s (BoFa) monthly global fund manager survey for March indicated a significant drop in growth expectations and U.S. equity allocation, marking the second-largest drop since the survey’s inception in 1994. The inconsistent tariff threats by President Donald Trump have scared the survey respondents, who collectively manage around $425 billion in assets, as per a Fortune report. This has led to a selling spree, contributing to the recent stock market correction.

According to the survey, 55% of fund managers consider a trade war-induced recession as the most significant “tail risk” for the market. Over 70% of respondents expect a form of “stagflation,” a combination of slow growth and rising inflation. However, none of the surveyed fund managers are currently predicting a full-blown recession.

In February, only a net 2% of investors anticipated a weaker global economy over the next year. However, this figure has now surged to 44%, marking the worst single-month drop in growth expectations since the COVID-19 pandemic began in March 2020.

The average cash position of fund managers surveyed increased by 60 basis points to 4.1% in one month, following the footsteps of legendary investor Warren Buffett, who has a huge $334 billion cash pile.

In a sharp contrast, a VandaTrack report indicated that despite the market turbulence, individual investors have invested $67 billion into U.S. stocks this year, reported the Financial Times. Goldman Sachs data reveals that retail investors have been net sellers of U.S. stocks on only seven occasions this year, even though the S&P 500 has declined on 25 days.

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Why It Matters: Earlier in March, investors had funneled cash into U.S. equities at the third-highest pace in history. Bank of America strategist Michael Hartnett had framed it as a "correction, not a bear market," following four weeks of market turmoil.

While the BoFa monthly survey results indicate a shift in sentiment, with fund managers showing reduced confidence due to the unpredictable tariff threats and the fear of a trade war-induced recession, retail investors remain optimistic about Wall Street equities despite fears over President Trump’s policies.

Jim Paulsen, an independent market strategist, told FT, "Investors still appear more concerned about missing a dip-buying opportunity" than they are about further market decline.” Meanwhile, Steve Sosnick, chief market strategist at Interactive Brokers, opined, "Dip-buying has been an essentially foolproof strategy for four of the past five years.”

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