Nervous investors are hoping to ride out looming financial storms by staying in cash.
In recent weeks global fund managers have increased their cash
stockpiles to the highest level since November 2001, the scary period
right after the 9/11 terror attacks, according to a Bank of America
Merrill Lynch survey.
“Investors have a mountain of cash,” Michael Hartnett, Bank of America’s chief investment strategist, wrote in a report.
The defensive maneuvering is a further sign that some investors are
too scared to be stuck holding risky stocks and bonds ahead of potential
upcoming shocks. The biggest fear among survey respondents is Brexit,
the U.K. referendum on leaving the European Union taking place next
week. Rising support in favor of dumping the EU has already begun to cause market turmoilin recent days.
Fund managers’ average cash allocation jumped to 5.7% this month,
surpassing even the levels during the 2008 Wall Street meltdown or the
2011 U.S. debt ceiling debacle, BofA said. Hartnett noted other “big
bear signals” as well, including investors displaying the lowest risk
appetite in four years.
This is hardly the only time lately that investors have showered love
on cash. During a recent stretch between July and February, BofA said
cash and money market funds were actually the world’s most popular asset class, attracting over $200 billion of inflows.
Still, it’s a tough time to be sitting in cash. Extremely low
interest rates around the world mean money in the bank earns virtually
nothing. And when inflation is factored in, cash actually loses value.
The average money market and savings account carries an annual
percentage yield of just 0.11%, according to Bankrate.com. Even savvy
savers who shop around for better rates aren’t fetching much more than
1% from online banks.