Investors’ cash holdings at highest in 15 years amid global financial, political turmoil

Bank of America Merrill Lynch study shows allocations to European equities underweight for first time in three years

PUBLISHED : Wednesday, 20 July, 2016, 5:45pm
UPDATED : Wednesday, 20 July, 2016, 5:45pm

Global investors are stockpiling cash and their allocation to equities has dropped to the first underweight reading in four years, the latest Bank of America Merrill Lynch Fund Manager Survey has found.

Cash levels are now at 5.8 per cent of portfolios, the highest reading since November 2001, up from 5.7 per cent in June.

“Record numbers of investors are saying fiscal policy is too restrictive and the first underweighting of equities in four years suggest fiscal easing could be a tactical catalyst for risk assets going forward,” said Michael Hartnett, the bank’s chief investment strategist, adding more fund managers now expect central banks to print money to fund increased government spending.

The survey also found 39 per cent of investors expect helicopter money in the next 12 months, up from 27 per cent last month.

The first underweighting of equities in four years suggest fiscal easing could be a tactical catalyst for risk assets going forward
Michael Hartnett, Bank of America Merrill Lynch chief investment strategist

Geopolitical risk is seen as the biggest threat to financial market stability, followed by protectionist risk, the survey found.

Allocations to European equities, meanwhile, is underweight for the first time in three years as a third of investors expect another country to break away from the European Union within the next three years, after Britain’s vote to exit last month.

Allocations to Japanese equities fell to the biggest underweight position in 3.5 years, while the Japanese Yen was perceived as most overvalued since January 2013, the study showed.

The popularity of emerging markets equities increased to 22-month highs, and investor buying of protection against a sharp decline in stock markets hit a record high.

A total of 195 panellists with US$537 billion assets under management participated in the survey.

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