Cash is king.
For a second month in a row, global investors surveyed by Bank of America Merrill Lynch said they were less optimistic about a strengthening economy while also noting that cash investments now represent an average of 5.5 percent of their portfolios — the highest level since the 2008 financial crisis.
The fund managers are surveyed monthly, and collectively manage $510 billion in assets. Although the increase in cash positions in July reflects concerns over the global equities markets, the survey revealed an “appetite to overweight European stocks.” But there was also the potential a euro zone breakdown is “now the biggest ‘tail risk,'” according to the analysts who compiled the report, which was released Tuesday morning.
Regarding overall confidence in the global economy, 42 percent of investors expect strengthening in the next 12 months, which is sharply down from 55 percent in June. China is also a concern, with 62 percent of those polled expecting the economy there to soften in the next year.
“Rising risk aversion and stretched cash levels provide a contrarian buy signal for risk assets in [the third quarter],” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch Global Research.
Manish Kabra, European equity strategist at the firm, added that “despite the Greek newsflow, intention to own European assets is high and rising, though global growth remains vitally important for European stocks.”
On that last note, U.S.-based equities have posted gains for the 52-week period, with retail and apparel stocks showing robust gains.