Spooked global funds drive up cash and bond holdings

LONDON (Reuters) – Spooked by another worldwide stocks selloff, global investors have piled up cash to a more than two-year high this month, hoovered up bonds and cut back property holdings.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 19, 2018. REUTERS/Brendan McDermid

Brexit worries have also made the UK stocks more unpopular than a long-running Reuters poll has ever seen, though there has been a tentative move back into U.S. and Asian equities despite the two region’s rumbling trade tensions.

The moves show how much confidence in the world economy has soured since the start of the year.

The combination of the U.S.-China trade tensions, central banks turning off the money taps and cooling growth will see world stocks .MIWD00000PUS suffer their first double-digit loss in any year since the 2008 global financial crisis.

Fund managers around the globe reduced their exposure to equities to 47.2 percent from 47.7 percent in November and 50.1 in January, which makes its the biggest shift out of stocks in a calendar year since Reuters started its survey in 2013.

“Investors are doubting global growth and fearing a recession with uncertainty over the direction of trade wars at a time when most global central banks have entered or (are) about to enter the tightening cycle,” head of multi asset at Liontrust Asset Management John Husselbee said.

A total of 45 funds took part in the poll conducted from Dec. 7 to Dec. 19. Fixed income holdings rose to 39.3 percent, a touch higher than October, while cash levels – a key gauge of investor caution – rose to their highest since November 2016 at 6.1 percent.

It means that cash holdings have risen more than 2 percentage points since the start of this year and it will be the first year since 2013 that there has been any kind of rise in cash levels at all.

Across equity portfolios, fund managers have cut back hardest over the last month on UK stocks as the Brexit process has been thrown into fresh chaos.

UK holdings have fallen below 8 percent for the first time in the poll’s lifetime and slipped by more than 2 percentage points over the year. A separate question in the poll also shows that most investors still expect Brexit to happen.

There are warning lights for the global property market too. Real-estate allocations are also now at their lowest level in the poll’s history at 1.2 percent.

On the flip side holdings in U.S. stocks have crept back up to a record high of 43.4 percent this month and investors have also nudged up their Asian levels for a second month running as the U.S.-China trade war salvos have eased a little.

“We have been buying stocks on weakness over the last few weeks and now have a moderate overweight position in the multi asset funds we manage,” Trevor Greetham of Royal London said.

“We are very much aware of the short term risks but with sentiment so depressed and stock market seasonality turning positive it’s time to say the glass is half full, not half empty.”

(For a graphic on ‘Global markets in 2018’ click tmsnrt.rs/2R8CUd7)

Additional reporting by Karin Strohecker in London, Sujith Pai in Bangalore, and Maria Pia Quaglia Regondi in Milan; Editing by Alexander Smith

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