Investors with $ 515 billion surveyed by Bank of America Merrill Lynch are not convinced by the rally of the New Year's stocks and prefer liquidity to equities.

Global equity allocations in February fell to the lowest level since September 2016, according to BofA, even as the MSCI All Country World Index was up nearly 8% in 2019. This points to a deep lack of conviction about the sustainability of the traders' rebound. The share of investors who believe that the S & P 500 index peaked at 2,931, rose from 11% in September to 34% this month.

Fund managers instead opted for cash, bringing the net allocation to 44%, the largest overweight since the 2009 financial crisis, according to BofA. Nonetheless, the strategists believe investor hesitation will be positive for the markets this quarter and that BofA's cash balance indicator is producing a counter-current buy signal, the note said.

"The February survey of fund managers reveals a sharp turn of stocks towards cash," said in a note the BofA strategists led by Michael Hartnett. This "does not show an improvement in investor sentiment; we say that the bearish positioning of investors remains positive for the price of assets in the first quarter.

The allocation to US stocks fell to its lowest level in 9 months, with an underweight of 3%, the region being the second least favored among fund managers, says the note. In contrast, euro area equities saw their allocation move to an overweight of 5%, ending a series of 18-month investment cuts. Emerging market equities exposure continued to be overweight at 37%.

The investigation period lasted from the week to February 7 and included 173 participants with assets under management of $ 515 billion.

Other elements mentioned in the survey include:

  • Global economic expectations advanced modestly in February, after extremely low levels, with two-thirds of investors still forecasting slower growth over the next 12 months
  • A survey reveals a record number of investors requiring companies to reduce their debt, while investors favoring dividends and redemptions are at their lowest level.
  • The most congested transactions are long-term emerging markets, long US dollar stocks and long shares of FAANG + BAT
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