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Cash Is King As Investors Bearish On Stocks – BofA Merrill Lynch Poll
The global fund manager poll reveals investors are feeling conservative, sticking with cash and edging away from equities in July.
Almost a month on from the momentous Brexit vote, investors' cash levels, at 5.8 per cent, are at their highest reading since November 2001, up from 5.7 per cent last month, according to the latest fund manager survey by BofA Merrill Lynch.
As uncertainties surrounding the UK's planned exit from the European Union continue to build, the number of investors looking to short UK equities is at the highest level since December 2009. Meanwhile, allocation to equities overall has dropped to the first underweight reading in four years. Allocation to European equities is underweight for the first time in three years following the largest ever single month drop in allocations to European stocks.
A third of investors expect another country to leave the EU in the next three years. Geopolitical risk is seen as the biggest risk to financial market stability, followed by protectionist risk. The survey identified a shift away from the eurozone, banks and insurance and into the US, industrials, energy, technology and materials.
Manish Kabra, European equity quantitative strategist at Merrill Lynch, said: “For the first time in three years, global investors are underweight European stocks. Europe finally belongs to the bears.”
Meanwhile, a record net 44 per cent of investors think global fiscal policy is currently too restrictive, and expectations of "helicopter money" over the next 12 months have risen to 39 per cent from 27 per cent in June.
“Record numbers of investors saying fiscal policy is too restrictive and the first underweighting of equities in four years suggest that fiscal easing could be a tactical catalyst for risk assets going forward,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
Allocation to emerging market equities jumped to a 22-month high in July – reaching net 10 per cent overweight from net 6 per cent overweight last month. The Japanese equity market saw its largest underweight in three-and-a-half years, with the Japanese yen perceived as the most overvalued it has been since January 2013.
The survey was carried out on 195 panellists with $537 billion in assets under management from 8 to 14 July 2016.
