Global fund managers are holding the highest levels of cash since 9/11, according to Bank of America research.
The September edition of the monthly Global Fund Manager survey found professional investors were holding 6.1% in cash. BoA said this was “only ever higher after 9/11” in October 2001 and was up from 5.7% in August. The long-term average for cash weightings was 4.8%.
Cash allocations were at a record overweight at 62% at the expense of equities and a record number of investors (61%) said they were taking lower-than-normal risk.
The reason for the above-average defensiveness was fears of a recession as 68% said they believed a recession was “likely” and 70% of respondents said they expected the energy crisis to cause a European recession.
Respondents were most bearish on the Eurozone, where allocations to European equities were at the most underweight ever, and least on the US with the UK also experiencing high bearish sentiment.
Looking at sectors, they were bullish on healthcare and consumer staples and bearish on discretionary stocks, industrials and utilities.
On the positive side, respondents felt that inflation had hit its peak and was likely to slow going forward after steep rises earlier this year. Over three-quarters of respondents said they expected to see slower inflation in the next 12 months, indicating inflation had peaked in August when the global inflation rate was 9.3%.
However, the threat of inflation remaining high was cited as the biggest tail risk to markets followed by hawkish central banks.
