The mood among global fund managers soured further in May, with investors flocking to cash amid concerns that a recession and credit crunch are looming, according to Bank of America Corp.’s latest survey.

The sentiment among fund managers deteriorated to the most bearish this year, with 65% of survey participants now expecting a weaker economy, BofA’s poll showed. At the same time, almost two thirds of investors see a soft landing as the most likely scenario for global economic growth and expect only a small contraction in earnings.

While cash levels rose to 5.6% in May, exposure to equities also climbed to the highest this year, while bond allocations are now the biggest since 2009, according to BofA. In a “flight to safety,” allocation to technology shares saw the biggest two-month increase since the global financial crisis and being long big tech is the most crowded trade.

The rally in global stocks has stalled in May, as investors fret over sticky inflation and the impact on growth from higher-for-longer interest rates. Continuing negotiations over the US debt ceiling are also putting a lid on risk appetite, though most surveyed fund managers expect it to be raised by the so-called X-date.

The latest economic data also didn’t bode well for sentiment, with investor confidence in Germany’s economy weakening for a third month as the country’s key manufacturing sector reels from a slump in demand.

BofA’s survey was conducted May 5-11, spanning 251 participants with $666 billion under management.

Other survey highlights include:

• Big rotation out of commodities, utilities, and into tech stocks — highest since December 2021 — and euro-zone equities
• Investors are most long growth versus value stocks since July 2020; survey investors have said only twice since September 2020 that growth would outperform value
• After long big tech, most crowded trades include short US banks, short US dollar, long European equities, long T-bills and long China equities
• Bank credit crunch and global recession are seen as top tail risks, followed by high inflation keeping central banks hawkish, worsening geopolitics and systemic credit event
• Share of surveyed investors expecting a debt ceiling resolution ahead of the X-date dropped from 80% in April to 71% in May

--With assistance from Michael Msika.

(Updates with German investor outlook data in fifth paragraph)