By Martin Baccardax

The world's biggest fund managers are moving into cash, citing risks tied to the U.S. war with Iran, worries over private credit risks and the specter of stagflation, according to a Bank of America survey published Tuesday.

The move toward cash, in fact, is occurring at the fastest pace since the Covid pandemic.

That hasn't triggered a capitulation in stocks yet, the bank's March Fund Managers' Survey indicated, although the poll's broadest measure of investor sentiment still sits at the lowest level in six months.

"The market has been in a precarious situation since the Nasdaq peaked in October, with weakening employment data, so so consumer spending, and Treasury yields that have at times been a bit worrisome," said Justin Gergner, portfolio manager at Gabelli Funds.

"And that grind up in the market has shifted to a grind sideways and now a grind down given sober economic data, macro indicators, and the Iran war disruption," he added.

Investors are still largely overweight stocks, but favoring emerging markets, with the largest allocation in five years, and equities in Japan, under the business-friendly leadership of Prime Minister Sanae Takaichi.

Japan's Nikkei 225 is up 6.7% since the start of the year, well outpacing the 2.1% decline for the S&P 500, while the iShares MSCI Emerging Markets ETF has also gained 6.7%.

The survey, which took views from around 210 fund managers who collectively control around $589 billion in assets, showed the biggest increase in allocations to cash since March 2020. The overall level, pegged at 4.3% of total assets, is now up more than a full percentage point from the all-time low recorded in January.

"There are few places to hide from this near-term supply shock [from the U.S.-Iran war]," said Jean Boivin, who heads the BlackRock Investment Institute.

"Government bonds and gold are not providing ballast as equities fall, and that's because investors are demanding more compensation for the risk of holding long-term bonds given persistent inflation and high debt levels," he added. "This latest supply shock only intensifies that dynamic, flipping the recent market narrative on disinflation and putting more upward pressure on bond yields."

Investors' perception of risk is changing fast, based on the poll results, with geopolitics and inflation replacing worries over a bubble in artificial intelligence as the market's biggest concern. On top of that, nearly two-thirds of respondents said private equity and private credit markets would be the most likely source of a systemic credit event.

Stagflation risks, which emerge when inflation accelerates but GDP slows, were also cited by more than half of the survey's respondents.

On the impact of the U.S.-Iran war on oil prices, however, investors seem a bit more optimistic. Only 11% of respondents see Brent crude, currently pegged at $102 a barrel, trading north of the $90 mark by the end of the year.

The weighted average of replies in the poll put it at around $76, close to where it was trading before the start of the conflict.

That said, around 34% said they were overweight the broader commodities sector, the highest reading since April of 2022.

"From an investment perspective, the situation in Iran comes down to when the conflict subsides, Gulf State oil production returns to normal and the Strait of Hormuz reopens," said Anthony Saglimbene, chief market strategist at Ameriprise.

"As of right now, the market appears to be pricing conditions that will likely return to a more normal state within a few months," he added. "But that expectation is certainly subjective and comes with fingers crossed at present."

Write to Martin Baccardax at martin.baccardax@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

March 17, 2026 11:18 ET (15:18 GMT)

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