Results from Bank of America Merrill Lynch's monthly survey of money managers show that cash balances are at levels not seen since November 2001, shortly after the terrorist attacks in the U.S. The amount of dry powder in portfolios is above that seen during both Europe's sovereign-debt crisis and the U.S. debt-ceiling debacle. When asked for views on the biggest risk, fund managers highlighted 1) EU Disintigration (20%) 2) Disorderly adjustment in bond markets (18%) 3) Republican (Trump) wins the White House (17%). According to the Bank of America analysts, elevated cash balances potentially sets the stage for a stock-market rally. "When average cash balance rises above 4.5 percent a contrarian buy signal is generated for equities. When the cash balance falls below 3.5 percent a contrarian sell signal is generated." (source: Bloomberg) (VIEW LINK)
I have 13 years experience in equity markets and financial media. In 2013 I Co Founded, Livewire Markets with Tom McKay. Our vision is to be the #1 source of investment ideas in Australia. Opinions expressed are my own.