Fund managers moving to equities from cash

Capitalstars Investment Advisor

The fear of missing out is triggering a switch among global fund managers into equities and cyclicals from cash, according to a fund managers’ survey by Bank of America Merrill Lynch.

“The bulls are back... global recession concerns vanish and ‘fear of missing out’ (FOMO) prompts wave of optimism and jump in exposure to equities and cyclicals,” the survey said.

Cash levels fell to 4.2 per cent in November from 5 per cent in the previous month, marking the biggest monthly drop since the election of US President Donald Trump in November 2016, the survey said. Cash levels are now at the lowest level since June 2013, said BofAML.

About 230 fund managers with $700-billion worth of assets under management participated in the survey.

Fund managers expect global growth to improve over the next 12 months --- the biggest month-on-month jump in growth expectations on record.

Long US tech stocks remains the most crowded trade, the survey showed, followed by long positions in US treasury bonds and investment grade corporate bonds.

The survey indicated that fund managers expect the equity asset class to perform best in 2020 followed by commodities and cash. Trade war remains the biggest tail risk, according to 39 per cent of the fund managers surveyed. A bond market bubble was seen as the biggest risk by 16 per cent of the fund managers surveyed while monetary policy impotence and slowdown in China were seen as the other big tail risks, the survey showed.