Advisers love bonds, cash and value stocks, shun growth and gold - BofA survey

Defensiveness is in style among financial advisers, according to the BofA Securities annual Global Wealth & Investment Management Survey.

Equity allocation (NYSEARCA:SPY) (QQQ) (DIA) (IWM) fell to 57% from 62% in 2022, the lowest level in the short six-year history of the survey. This time around, 372 Merrill financial advisers from around the country responded.

Exposure to bonds (TBT) (TLT) (SHY) (IEI) (HYG) (LQD) rose 3 percentage points to 27%, the highest recorded.

"These shifts may continue: 39% said they are moving more into bonds, vs. 18% for equities, consistent with the average bond allocation from sell-side strategists hitting a 10-year high," strategist Savita Subramanian wrote in the survey note Wednesday. "We see long duration bonds (and long duration growth stocks) as risky given rate sensitivity."

Cash (VMFXX) (SPAXX) allocation rose to 10% from 7%.

"Just 26% plan to buy stocks with excess cash (v. 42% last year), while 29% plan to buy bonds," Subramanian said. "30% are happy to remain in cash. Cash return/dividend strategies are most frequently requested by clients (82%). We concur. We also prefer companies with self-funded growth (cash flow generators) to those that need to borrow to grow."

Among other highlights in the survey:

• In stocks, 78% prefer Value (IWD) (VONV) vs. 12% who like Growth (IWF) (VONG).
• Respondents are most bullish on Healthcare (XLV), 76% bullish, Energy (XLE), 73% bullish, and Financials (XLF), 67% bullish. They are most bearish on Consumer Discretionary (XLY), 51% bearish, Real Estate (XLRE), 44% bearish, and Info Tech (XLK), 37% bearish.
• Biggest tail risks cited were recession, 18%, central bank policy mistakes, 17%, and geopolitics and inflation, both at 15%. Inflation was top last year. Only 2% cited equity bubbles, down from 15%.
• With gold (XAUUSD:CUR) (GLD) (IAU) (PHYS), 71% of advisers have little or no exposure, up from 69% last year. Only 12% said they would be increasing allocation to the yellow metal.

Citi advises playing defense in a choppy near term.