Investor Cash Levels Sink As Growth, Profit Expectations Hit One-Year High – Global Poll

Josh O'Neill Reporter 17 November 2016

Investor Cash Levels Sink As Growth, Profit Expectations Hit One-Year High – Global Poll

President-elect Donald Trump's rise to power is music to investors' ears, according to a global fund manager poll.

Investors' cash levels have deflated from 5.8 per cent to 5 per cent in November, the largest month-on-month drop since August 2009, according to a survey by Bank of America Merrill Lynch.

The less wary approach comes as global growth and profit expectations have risen to one-year highs, coupled with investors' “unambiguously positive” perception of the US election result for nominal gross domestic product.  

The monthly fund manager survey sampled 177 clients with a total of $456 billion of assets under management between 9-14 November following the results of the US election.

Donald Trump winning the White House accelerated investment into banks, out of high-dividend yield and bond proxies, in turn catalysing buying of US equities.

BofA Merrill Lynch found a record net 56 per cent of investors think current fiscal policy is too restrictive, with global inflation expectations soaring to 85 per cent, a 12-year high, according to the survey.

However, stagflation expectations hit a four-year high as 2 per cent of investors cited expectations of below-trend growth and above-trend inflation throughout the next year.

Some 84 per cent of survey respondents said that protectionism, the economic policy of restricting cross-border trade through government regulation, poses the biggest risk to financial market stability.

Elsewhere, allocation to emerging market equities plummeted from 31 per cent overweight to 4 per cent overweight throughout October.

Allocation to European equities hit a five-month high, swelling from net 5 per cent overweight last month to 8 per cent overweight.

Meanwhile, Japanese equity allocations dipped modestly in November to net 5 per cent underweight from net 3 per cent underweight last month.

“There will likely be a trade in bond proxies soon,” said Michael Hartnett, chief investment strategist. “But our cyclical view of peak liquidity, globalisation and inequality means the ‘yield’ dam has been broken.” 

Manish Kabra, European equity quantitative strategist, added: “Global investors’ equity allocations towards the UK are at their second lowest level since 2008, with the sterling considered the most undervalued in the history of our long-running survey. 

“Europe seems placed for contrarians, with eurozone allocations at below-average levels.” 

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