Investors with $515 billion surveyed by Bank of America Merrill Lynch aren’t convinced by the new-year equity rally and prefer cash to stocks.
Global equity allocations in February fell to the lowest level since September 2016, according to BofA, even as the MSCI All Country World Index is up almost 8 percent in 2019. That indicates a deep lack of conviction in the sustainability of the rebound among traders.
The share of investors who believe the S&P 500 Index has peaked at 2,931 jumped to 34% this month from just 11% in September. Money managers moved into cash instead, taking the net allocation to 44 percent, the highest overweight since the 2009 financial crisis, according to BofA. Still, the strategists believe that investor hesitancy is going to be favorable for markets this quarter and BofA’s cash balance indicator is currently flashing a contrarian buy signal, the note said.
The “February fund manager survey shows a big rotation from equities into cash,” BofA strategists led by Michael Hartnett said in a note. It “does not show an improvement in investor sentiment; we say bearish investor positioning remains first-quarter positive for asset prices.” Allocation to US stocks fell to the lowest in 9 months to a 3% underweight, with the region being the second-least favored among the money managers. In contrast, euro-zone equities saw a jump in allocation to a 5% overweight, ending an 18-month streak of investment cuts. Exposure to emerging-market stocks kept rising to a 37 percent overweight.