Rising bond yields and political uncertainty drive fund managers to reduce stock allocations, as investors brace for potential market volatility ahead of midterm elections.
Survey identifies disorderly rise in bond yields as biggest tail risk, with 10-year yield already past 5%.
30-year Treasury yield mentioned as a threshold for shifting bond allocations, currently around 5.37%.
Fund managers are reducing stock allocations and expect stocks to fall if Democrats sweep midterms.
Global fund managers are trimming equity exposure and raising cash as bond market volatility emerges as the primary tail risk. Bank of America’s latest survey reveals that investors now view a disorderly rise in yields as a greater threat than the AI bubble, with 10-year Treasury yields climbing past 5%.
The biggest tail risk identified by managers is a disorderly rise in bond yields, which has surpassed concerns regarding an AI bubble.
Nearly half of the surveyed investors expect that a Democratic sweep would lead to higher bond yields and a subsequent decline in stock prices.