By Paul R. La Monica
Fund managers are nervous about the economy. But could that be a contrarian signal to buy stocks?
Bank of America said in its April fund manager survey released Tuesday that buy-side investors were the most bearish they've been since the end of the second quarter of last year, shortly after Liberation Day worries about tariffs rocked the markets.
BofA said that the fund managers' expectations for growth fell the most since March 2022 while concerns about inflation were at their highest levels since May 2021. But you know the saying about how the market climbs a wall of worry? The fact that fund managers are this jittery might be a "contrarian positive for risk assets," according to BofA strategists.
The one caveat? A continuation of the recent rally may depend on whether or not the current cease-fire between the U.S. and Iran holds and pushes oil prices -- now hovering around $95 a barrel -- to below $84. As such, BofA suggested that fund manager sentiment does not mean it's a "close-eyes-and-buy" moment for stocks.
That may especially be the case now that the S&P 500 is up more than 6% so far in April and is once again approaching an all-time high. The Nasdaq has soared more than 8.5% this month and is in the midst of a 10-session winning streak.
Still, investors might want to position for further gains, especially if Americans continue to spend, regardless of the worries about oil and other macro concerns. BofA said fund managers believe that lower oil prices and inflation could lead to more rate cuts, which would be a "bull surprise."
A large majority of managers (70%) also said they are not expecting a recession this year and just over half indicated that the base case for the economy is a soft landing. That would bode well for consumer discretionary stocks in particular.
The State Street SPDR S&P Retail and State Street Consumer Discretionary Select Sector SPDR ETFs have trailed the broader market this year, falling 2% and 3%, respectively.
John Barr, portfolio manager with the Needham Aggressive Growth Fund, told Barron's that he's finding good opportunities in consumer stocks as well. Three that he owns in his fund? Fitness-center operator Life Time Group Holdings, baseball team Atlanta Braves Holdings, and cat litter maker Oil-Dri Corp. of America.
There are opportunities beyond consumer stocks, though. BofA said that contrarian bulls are also buying bonds on rate cut expectations as well as real estate investment trusts. REITs tend to pay hefty dividend yields and often rally when bond rates fall.
Where should investors tread cautiously then? BofA said that fund managers pointed to oil and semiconductors as the most crowded trades.
Skepticism about oil and energy stocks makes sense given how much crude prices have spiked since the war in Iran began in late February. Chevron is is one of the top performers in the Dow Jones Industrial Average, rising more than 20% this year while the State Street Energy Select Sector SPDR ETF is up nearly 25%.
As for semiconductors, Advanced Micro Devices, Micron, Intel and several other chip stocks have enjoyed solid gains thanks to hopes for more demand due to artificial-intelligence. The iShares Semiconductor ETF has soared more than 30% so far in 2026.
So given that energy stocks and chips have already rallied sharply this year, it may make sense for contrarian investors to look for laggards in other parts of the market to take the lead for the remainder of 2026. If markets continue to bet on a resolution to the Iran conflict and easing oil prices into the summer, consumer stocks could be one place to look.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 14, 2026 14:59 ET (18:59 GMT)
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