Bank of America Merrill Lynch fund manager survey for July shows investors lifting cash levels.
With concerns over China, Greece and the possibility of a FED rate hike coming soon, global equity markets have seen a correction since April. Traditionally investors look to Bonds, Gold, Dollar and Yen as alternatives when stocks are heading lower but recently the reliable inverse correlations between these safe haven assets and equities “seem” to have broken down. Through May and April, as Equities sold off, US T-bonds, UK Gilts, Gold and the Yen were all down, with the Dollar fairly flat.
So where are investors going?
Well it looks like cash! According to the latest Bank of America Merrill Lynch fund manager survey for July, cash levels are at the highest level since December 2008. This raises the interesting possibility that money managers are not rushing into bonds or gold for the simple reason they are not yet looking for safe havens. Instead they continue to favour equities but have decided to cut back until the current storms have abated. One thing we do know is that investor sentiment has fallen away quite sharply recently and this survey from BoAML may actually be another indication that fuel levels are rising. Hopefully these big investors are simply biding their time awaiting the opportunity to get back in – which could help lift the market.