Worries over the price of oil, stagflation and the impact of interest rate rises have combined to lower investors expectations for corporate profitability and global growth, finds the survey.
Investors have padded out their cash piles and cut equity holdings as they contemplate an uncertain economic future, according to a survey of fund managers by Bank of America Merrill Lynch (BofAML).
Worries over the price of oil, stagflation and the impact of interest rate rises have combined to lower investors expectations for corporate profitability and global growth, finds the survey. The uncertain outlook means a net 18 percent of respondents are overweight cash this month, compared to a net 3 percent underweight in February.
The survey also reports that average cash balances have risen to 4.1 percent of portfolios for March, up from 3.5 percent a month ago. ‘The shift in the March survey is toward stagflation, with lower growth expectations and higher inflation and interest rate expectations causing cash levels to rise,’ comments Michael Hartnett, chief global equity strategist at BofAML, in a release.
At the same time as boosting cash piles, fund managers also cut their exposure to equities, reports the survey. This month, a net 45 percent of respondents say they are overweight equities, a fall from a net 67 percent overweight in February. BofAML stresses in the survey that fund managers have not turned bearish and conducted a massive sell off. Rather, they are in ‘wait-and-see mode’ and sentiment could pick up again soon.
The global survey canvassed the views of 203 investors, managing a total of $602 bn in assets, and took place between March 4 and March 10, so the impact of the Japanese earthquake on March 11 will not have been factored into the results.