More global fund managers now expect a recession than at any time since 2011 (which you'll remember, was a tough year and a time when every other headline was fretting about the solvency of Greece). More global fund managers are bullish on bonds than at any time since 2008 only 9% of them expect to see higher bond yields in the next 12 months which, given that bond yields are at record low levels in most parts of the world, is quite something.
And an overall majority of fund managers expect value stocks to underperform growth over the next 12 months, the most bearish managers have been on value's relative prospects since the financial crisis.
All of this data comes from the latest Bank of America Merrill Lynch monthly survey of global asset managers, and more than anything else, it shows one thing investors are currently positioned for extremes. You don't need to look far to see evidence of this in markets themselves. MoneyWeek readers will already be well aware that US equities are expensive by historic standards.
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A key part of the US yield curve has finally inverted, a pretty reliable recession signal. And as we highlight in our cover story this week, bond yields across the world have plumbed extraordinary new depths (and thus bond prices have hit extraordinary new highs), with yields in Germany in particular sliding to unheard-of lows amid fear of recession.
As James Ferguson of the Macro Strategy Partnership points out in a recent research note, "historically, such boundaries have determined market turning points". The question however is: where will the markets turn next?
It's a tough call. The clearest signal for a contrarian (and if we're suggesting this is a turning point, then contrarian is what we want to be) is that investors are betting heavily on deflation. This is surprising when you look at the economic data. In the US, where the strong dollar should be exerting downward pressure on inflation, prices are rising at a rate of 2.2% a year, based on the Federal Reserve's favourite measure.
Here in the UK, price inflation is rising at 2.1% a year and wage inflation came in at a very strong 3.9%. I'm certainly open to the idea that we might see a slowdown or even a recession in the relatively near future, but I'm far from convinced that we'll see deflation severe enough to justify bond yields at current levels.
The question of course is what to do about this. We have some ideas in the cover story, and Max looks at a particularly appealing Brexit-battered sector, but perhaps the best bet at extremes is to take a chance to review your portfolio (if you haven't done so in a while). Are there any sectors where you've made a lot of money and feel you are now over-exposed? Do you have enough gold (for insurance) and cash (for quickly jumping on opportunities)? And most importantly do you have a clear financial plan at all? Because if you don't, the midst of a market panic is not the time to be caught without one.
If you're in Edinburgh this month, don't miss Merryn Somerset Webb hosting The Butcher, The Brewer, The Baker... and the Commentator, a panel discussion on politics and economics at Panmure House (Adam Smith's last home). It runs until 25 August (and I'm a guest on the 22 and 23). Book now at tickets.edfringe.com.
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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