Global investors are moving toward a “risk-off” stance, taking on greater protection as the prospect of geopolitical instability grows.
Responding at a point of growing tension in Ukraine, 81% of investors said they see geopolitical risk posing a threat to financial markets stability—more than four times the reading one month ago, according to the BofA Merrill Lynch Fund Manager Survey for March.
At the same time, investors continue to express concern about the prospects for emerging markets—with sentiment toward China’s economy falling further.
Investors have reacted by showing reduced optimism about the prospect for corporate profits globally and by reining in risk. They have increased cash allocations, reduced equity holdings and taken on greater protection.
The proportion of investors taking lower than average risk in their portfolio has increased to 14% from 2% in February. Sixteen percent of global asset allocators say that they are overweight cash, up from a net 12% last month. Average cash balances remain high at 4.8% of portfolios. The proportion of asset allocators overweight equities has dropped by nine percentage points month on month to 36%.
“With neither inflation nor recession posing a threat, we believe the equity bull market is far from over and investors should be putting excess cash into risk assets,” says Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
Related articles: