Most believe that they are overweight on stocks and are positioning for rising rates and the scale back of quantitative easing by the Fed
Big money funds are positioning themselves for a cocktail of changes that make larger cash holdings more appropriate.
According to the latest Fund Managers Survey from the Bank of America (BofA), released Tuesday, investors’ cash allocations increased to 4.1% in March from 3.8% in February.
Investors are becoming increasingly concerned about rising rates as the conversation about inflation intensifies. There are also expectations that the US corporate tax environment could shift under the Biden administration, along with the talk of a global minimum tax rate.
Add into the mix the risk of the Fed scaling back of its quantitative easing program and there’s plenty to make fund managers cautious.
Stocks bubble?
Investors are holding stocks with market capitalization of around US$90 trillion thanks to an 82% surge in the past year.
But does the high exposure to equities lead fund managers to worry about a bubble?
Among the 220 panelists polled by BofA, with a collective $553 billion in assets under management, 62% said that they were overweight on stocks. That’s near the record high.
But just 7% felt that equities were in bubble territory, although most expect a pullback on stocks of at least 10% if US 10-year Treasury yields exceed 2.1%. Currently, the rate is around 1.7%.
