Global investors are shifting away from equities and into cash amid growing concerns over a US interest rate hike, a Greek default and a Chinese real estate bubble, according to June’s Bank of America Merrill Lynch (BofAML) fund manager survey.
Cash levels now account for an average of 4.9 percent of investors’ portfolios, an increase from 4.5 percent in May, the survey shows. At the same time, the proportion of investors that overweight equities has dropped to a net 38 percent from a net 47 percent.
The main concern on the horizon, according to BofAML, is a likely increase in the US benchmark interest rate ‒ the first hike since 2006 ‒ sometime in the second half of the year. A net 80 percent of the global investors surveyed predict an increase in short-term rates, the highest percentage since May 2011.
‘Higher cash levels show how caution is in the air, with 65 trading days until we expect the Fed to tighten,’ says Michael Hartnett, chief investment strategist at BofAML Global Research, in a press release announcing the results of the survey.
Most survey respondents see a negative outcome to talks over Greek debt, with 15 percent predicting Greece will default and leave the euro, and 42 percent predicting it will default but stick with the European currency. Seven out of 10 investors surveyed say China’s equity market is in a bubble after its recent years of rapid gains, and a net 50 percent predict China’s economic growth is set to weaken further.
A net 21 percent of investors say they expect to underweight emerging markets in coming months, a sharp increase from the net 6 percent that said the same last month. And a net 17 percent of investors, up from a net 5 percent in May, predict corporate operating margins will drop in the coming 12 months.
