Global Fund Managers Run Into Cash, Experience Muted Risk Appetite

The Brexit vote is near, markets are struggling to bust out to new highs, and we have bonds no longer moving inversely to the equities. Bank of America's Michael Hartnett published his Fund Managers Survey (FMS) on Tuesday and it shows there are "no bulls on bear mountain" as fund managers yank exposure to risk assets and load up on cash positions.

For the month of June, the FMS shows cash level for fund managers hovers around 5.7 percent, the highest since November 2001. Global Equity Allocation relative to cash/bonds/commodities sits at the lowest level since July 2012.

As for the most crowded trade, no surprise it's the "long quality" view.

Looking out toward the Brexit, Hartnett's survey shows two-thirds of investors "think BREXIT is either 'unlikely' or 'not likely at all'"

For all the unlikelihood of the Brexit, it is somewhat surprising to see investors so clearly stating, with their positioning, that the Pound is undervalued, a consistant viewpoint we have not seen since mid-2008.

Following the 2009 crash, the Fed and global central bank backstopping of toxic assets helped to mitigate the required uncomfortablness of dealing with an asset price correction.  Now that we are 8 years into the unprecedented central bank intervention, investors have anchored to the saving graces of the Fed and their cabal of money printers.  It comes as no surprise that global investment managers have no idea how to act now that the central banks are getting tired of being the sole bidders in a jacked-up and price-skewed market.  As we highlighted last week, we need a bigger helicopter lest we swallow the horrible tasting medicine of a global market selloff.