MILAN (Reuters) – Investors raised cash levels further in October to their highest in 21 years, as sentiment towards the economic outlook remained close to max bearishness, the latest global fund manager survey (FMS) by BofA showed on Tuesday.
BofA said however growing investor expectations of a change in central bank monetary policy indicate a ‘big rally’ is likely in 2023.
“FMS screams macro capitulation, investor capitulation, start of policy capitulation,” BofA said, adding it expected the rally in the first half of next year, when interest rate cuts by the U.S. Federal Reserve become the consensus position.
This change is already beginning. The share of investors anticipating lower short-term rates in the next 12 months doubled to 28% in October from September, while those seeing higher rates continued to fall from the early 2022 peak of 92% to 59% this month, it said.
As for now, cash levels rose to the highest since April 2001 at 6.3%, as investors stayed underweight stocks in anticipation of a recession and as market stability risk metrics reached an all-time high due to monetary and credit concerns, BofA added.
BofA polled 371 panelists overseeing $1.1 trillion in assets between October 7 and October 13.
(Reporting by Danilo Masoni, editing by Alun John)