Big investors have the highest amount of money stopped since 9/11

The cash balances of international fund managers rose to their highest level since the Sept. 11, 2001, terrorist attacks in the United States, a move that reflects the concern of large investors about deteriorating equity market prospects.

Treasury jumps rose an average of 6.1% across the portfolios of global asset allocators, according to Bank of America, which conducted a survey of 288 investment professionals who together oversee $833 billion in assets for funds. pension funds, insurance companies, asset managers and hedge funds.

The option to keep money still – which typically gains strength in periods when risk aversion increases – coincides with a significant weakening in expectations regarding the results of large companies.

In May, 66% of fund managers said they expected global profits to fall, in line with results recorded in other periods of crisis, such as the Lehman Brothers bank implosion in 2008 and the bursting of the Internet bubble in 2000.

Michael Hartnett, chief investment strategist at Bank of America, said sentiment among investors was “extremely negative”, with 13% of fund managers choosing to reduce their equity positions, compared with 6% who chose to raise the peso. of shares in their portfolios in April.

Wall Street analysts had been revising their forecasts for earnings for big US companies further since January of this year, and Hartnett said any small bit of good news could result in a temporary market rally. But he also cautioned that “the biggest low” in equities had not yet been reached, with the MSCI All Country World Index, an international gauge, having dropped nearly 17% in dollar terms from the beginning of the year to date.

The US Nasdaq Composite Index has fallen by nearly 25% since the beginning of the year, and has caused a depression in the market, as investors abandon once-highly quoted technology companies.

International fund managers have maintained high exposure to technology stocks for 14 years, but in May this situation was reversed and 12% of them reduced the weight of technology stocks in their portfolios.

“It’s the biggest bet against the technology since August 2006,” said Hartnett.

Goldman Sachs has increased the weight of the cash balance in its portfolio and on Monday reduced the stock to a “neutral” position in its quarterly recommendation.

Christian Mueller-Glissmann, a strategist at Goldman Sachs in London, said investors would have to see a “compelling spike” in inflation – which is at its highest mark in 40 years in the US – before risk appetite picks up. stabilize.

“Stocks are now negatively correlated with inflation expectations, meaning investors are more concerned about the risks of inflation and its impact on equities,” Mueller-Glissmann said.

Richard Dunbar, director of multi-asset research at Abrdn, an Edinburgh-based asset manager, said persistent high inflation was fueling doubts about whether the Federal Reserve (Fed), the U.S. central bank, should avoid jeopardizing the economy. American economy into a recession in order to restore price stability.

“Investors have not yet built a US recession into their prices, but there is growing pessimism about the Fed’s ability to find the optimal monetary policy position to achieve a soft landing for the US economy,” Dunbar said.

_{Translation of Paulo Migliacci}