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.
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