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Investors Pull In Their Horns Amid Market Jitters - BoA Merrill Lynch

Tom Burroughes, Group Editor , 18 April 2018

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The monthly barometer of how investors think showed a retreat from risk this month.

Investors took risk off the table in April amid concerns about whether equity markets will soon roll over and due for falls, according to a global survey of investment management opinions by Bank of America Merrill Lynch.

Average cash balances rose by 0.4 per cent to stand at 5 per cent in April, the survey said. Fieldwork for the study was carried out from 6-12 April; 216 panellists with $646bn of assets under management took part in total. 

“The bulls have been silenced but not defeated, evidenced by increased cash allocations and low expectations of global growth and profits,” Michael Hartnett, chief investment strategist, said.

Asked about whether equity markets have peaked, 18 per cent of investors surveyed think equities have already have done so; 40 per cent expect a peak in the second half of 2018, while 39 per cent think they won’t peak until 2019 or later.

Allocation to equities fell to the lowest level for 18 months, with a net 29 per cent weighting, down from net 41 per cent overweight stance in March, BoA ML said.

Expectations for faster global growth continued to fall, with net 5 per cent expecting the global economy to be stronger in the next 12 months; this marks the lowest level since the UK voted to leave the EU in June 2016. The net percent of investors expecting profits to improve over the next 12 months fell to 18-month lows of just net 20 per cent.

The threat of a trade war (38 per cent) remains at the top of list of tail risks most commonly cited by investors, followed by a hawkish policy mistake by the Federal Reserve/European Central Bank (22 per cent) and concerns that the market structure will cause illiquidity (10 per cent).

The most crowded trade for investors is being long of the FAANG + BAT stocks: Facebook, Amazon, Apple, Netflix, Google and Microsoft and Baidu, Alibaba and Tencent.

 

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