Investors are markedly bearish, with 75% anticipating a U or W-shaped recovery from the economic fallout of the coronavirus pandemic compared to just 10% expecting a V-shape, according to the latest global fund manager survey from Bank of America.
A second wave of coronavirus ranks as the greatest tail risk by far, with 52% of managers surveyed citing it, while permanently high unemployment (15%) and a break-up of the European Union (11%) claim the second and third spots.
Cash levels have dipped slightly to 5.7% from April's 5.9% but remain well above the 10-year average of 4.7%, which indicates that a "buy signal" is a contrarian bet.
In line with this "extreme bearish" investing, those who responded are underweight cyclical assets, such as energy and industrials, and are overweight defensive assets, including healthcare, cash and bonds.
The value versus growth argument has returned to pre-Global Financial Crisis levels, with net 23% of investors believing that value will underperform growth, a figure last seen in December 2007.
A net majority of managers (63%) said that companies are overleveraged, supporting the opinion that investors want firms to spend their cash on improving balance sheets, with net 73% hoping for this, while 15% want an increased capex and 7% wish the cash to be returned to shareholders.
The euro looks cheap to those surveyed, with net 17% suggesting the currency is undervalued, while net 43% believe the US dollar is overvalued, although exposure to US equities remains overweight at net 24%, while eurozone equities are underweight (net 17%), their lowest allocation since July 2012.
Despite this, the UK has attained the title of most underweight region in this month's global fund manager survey at net 33% underweight.
Supply chain reshoring, a rise in protectionism and higher, new forms of taxes rank highest on investors' lists of structural change in post-Covid world, cited 68%, 44% and 42% of the time respectively.
Debt exemptions, green energy, stagflation and universal basic income also feature on this month's list of likely post-pandemic shifts.