Bank of America Merrill Lynch’s July poll of global fund managers found that investors’ cash hoard stood at 5.8% of their portfolios, a level unseen since November 2001, up from 5.7% in the June survey.
A net 44% of investors considered current global fiscal policy too restrictive, and 39% expected a major central bank to adopt a policy of helicopter money over the next 12 months, up from 27% in June.
Allocation to equities dropped to the first underweight reading in four years, net 1%, from net 1% overweight last month.
The survey revealed that investors were buying protection against a sharp decline in the stock market, which is at a record high.
What Your Peers Are Reading
“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,” BofAML’s chief investment strategist Michael Hartnett said in a statement.
A total of 195 panelists with $537 billion in assets under management participated in the survey conducted in mid-July.
BofA said that average cash balances above 4.5% generated a contrarian buy signal and those below 3.5% a contrarian sell signal.
The survey found investors’ positioning contrarian bullish for risk assets — despite the U.K.’s Brexit vote, global terrorism and the S&P Index options (SPX) at an all-time high and the U.S. Treasury yield at an all-time low.
Although growth/profit expectations were flat to negative, only 17% of panelists thought a recession was likely.
Fund managers’ most crowded trades were long high-quality stocks, favored by 34%, long U.S./EU corporate bonds, by 20%, and short European banks, by 17%.
According to the July poll, global investors rotated out of the eurozone, banks and insurance and into U.S. equities, industrials, energy, tech and materials.