The rise in global growth concerns, coupled with the worst start to a year by U.S. equities in history, has triggered a dramatic flight to safety.
Bank of America Merrill Lynch said Tuesday that asset managers have cut their collective S&P 500 position to its lowest level since the bank began tracking the data in June 2010.
BofAML said managers have decreased long positions within the benchmark U.S. index to $23.7 billion, down from $33 billion, as of Jan. 12. Long positions on the Nasdaq 100 also reached their lowest since December 2012 and totaled $7.3 billion, down from $9.2 billion.
On the other hand, long positions on U.S. 10-year Treasurys have risen $10.3 billion, to $39.2 billion, while shorts, or best against the price rising, on two-year Treasurys have fallen by $500 million.
The data release came nearly a week after an American Association of Individual Investors survey found that individual investor optimism hit its lowest level since April 2005.
The market has been plagued with growth concerns since the turn of the year, as weak Chinese manufacturing data coupled with plunging oil prices have led to the three major U.S. indexes falling squarely into correction territory, or off at least 10 percent from their 52-week highs.
Investors also digested the International Monetary Fund’s latest World Economic Outlook report, in which the organization trimmed its global growth forecast by 0.2 percentage point.
The possible silver lining: Investors may have found a contrarian indicator pointing to a bounce.
“Anytime you get to extremes like these, they become more of a contrarian indicator,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
“The more people start jumping on the bandwagon going lower … the sooner we can get on a rally mode,” said Bruce McCain, chief investment strategist at Key Private Bank.
“I think one of the concerns we have is that we haven’t heard the negativism you’d hear if we’d hit the bottom,” he added.
Nonetheless, Luschini said investors should be careful when weighing these data. “Just because they are at historical lows, … it doesn’t mean they can’t go lower,” he said.
On Tuesday, U.S. stocks gave up most of an aggressive early rally by midafternoon. The Dow Jones industrial average gained as much as 183.88 points at its high, while the S&P and the Nasdaq composite both rose more than 1 percent, before paring gains.