Global investors raised their cash levels to 5.5% in September, up from 5.4% in August, according to the latest Bank of America Merrill Lynch fund manager survey.
Forty-two percent of investors said high cash levels were a “bearish view on markets,” and 20% said those levels showed a “preference for cash over low-yielding equivalents.”
Bank of America noted that average cash balances above 4.5% generated a contrarian buy signal and cash balances below 3.5% a contrarian sell signal.
The equity allocation relative to the cash allocation in September was effectively at its lowest point in four years, a level that has historically been a good entry point to stocks, according to the survey.
Global growth expectations rose to a nine-month high in September, with a net 26% of investors expecting the global economy to improve over the next 12 months.
Sixty-one percent of investors said they expected higher long-term rates over the next 12 months, sharply up from the 47% of fund managers who said this in August.
Chinese growth expectations also improved in September to negative-32% from negative-45% last month.
A third of fund managers in the poll saw Treasuries as the main driver of stock prices over the next six months, while 25% said it would be the U.S. dollar and 13% the European risk premium.
Eight in ten respondents believed that neither the Bank of Japan nor the European Central Bank would eliminate negative rates over the next 12 months.
At the same time, 53% of investors said it was unlikely a central bank would adopt a policy of helicopter money over the same period.
The most crowded trades in September were all “NIRP (negative interest rate policy)-winners,” according to the survey.
Thirty percent of investors cited long high quality stocks as the most crowded trade, followed by 26% who cited long US/EU investment grade bonds and 11% long emerging market debt—all of which are dependent on NIRP.