More than one in three investors are forecasting a global recession in the next 12 months, marking an eight-year high as trade war worries linger over markets across the world.
In the highest recession probability level since October 2011, 34 per cent of investors surveyed by Bank of America Merrill Lynch have said they think two consecutive quarters of negative growth are likely in the year ahead.
More than half of investors (51 per cent) said that the current tit-for-tat tariff war between China and the US was the biggest tail risk, while 15 per cent cited monetary policy impotence.
According to the US bank’s fund manager survey for August, a net 43 per cent of investors also expect lower short-term rates while only a net nine per cent expect higher long-term rates over the next 12 months.
Such an outlook makes the survey the most bullish view on bonds since November 2008.
“Investors are the most bullish on rates since 2008 as trade war concerns send recession risk to an 8-year high,” said Michael Hartnett, chief investment strategist.
He added: “With global policy stimuli at a 2.5-year low, the onus is on the Fed, ECB and PBoC to restore animal spirits.”
Wall Street was spooked earlier this month when Trump vowed over Twitter to impose a 10 per cent on a final $300bn worth of Chinese imports.