Fund manager cash levels hit 20-year high
19th October 2022 10:15
by Kyle Caldwell from interactive investor
Fund managers are hoarding cash in a sign that they expect markets to fall further, even after a 23% drop for the S&P 500 this year.
Professional investors remain extremely bearish, upping cash levels to their highest in 21 years, according to the October Bank of America fund manager survey.
Cash levels now stand at 6.3%, up from 6.1% last month. This marks the highest dash for cash since April 2001.
- Find out about: Free regular investing | Interactive investor Offers | ii Super 60 Investments
Poor sentiment towards the economic outlook is central to investor pessimism. Three in four pros expect a recession to occur within the next 12 months.
As a result, the survey notes sentiment towards equities is “close to max bearishness”.
UK equities are notably out of favour. Over the past month, global fund managers reduced exposure by nine percentage points to a net 33% underweight. This is the most underweight the global pros have been since November 2020.
- Record amount exits equity funds, with investors favouring bonds
- How defensive funds are faring as shares and bonds fall in unison
In terms of sectors, utilities and energy stocks saw an increase in popularity versus last month. Becoming less popular were consumer staples, telecoms and bank stocks.
The most-crowded trade among the pros is betting on further strength for the US dollar, at 64%. This is followed by being short (betting against) European shares and investing in sustainable shares, which both polled 8%.
While investors are in cautious mode, Bank of America anticipates “a big rally” in the first half of 2023 in the event of the consensus among the pros of switching from interest rate rises to interest rate cuts in the US.
Getting a handle on red-hot inflation will be key to putting the brakes on rising interest rates.
- A tactic to ride out the inflation storm using these funds and trusts
- The most-popular dividend shares among fund managers
The latest inflation figures (released this morning) for the UK make for grim reading, with price increases returning to a 40-year high of 10.1%.
However, with regards to US inflation, which is running at 8.2%, the consensus among the pros is that it has peaked and will cool over the next 12 months.
In total, 371 panellists were polled, overseeing $1.1 trillion (£975 billion) in assets.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.