In motor school, they always teach you to look up and ahead as far as you can when racing. This is so that you can anticipate obstacles to your vehicle with as much notice as possible. One of the ways we can do that in the stock market is to look at the cash equity ratios of the trading community as a barometer of how risky they think it is to trade in today’s market. I am therefore quoting a snippet of information which I gleaned from the internet:
Fund managers expect global economy to weaken
Fund managers have become more pessimistic about economic growth and corporate profits, and are lifting their cash holdings as risk aversion levels rise. According to the Financial Times, one of the gloomiest monthly polls taken by Merrill Lynch found that a net 60% of respondents expect the global economy to weaken during the next 12 months, the survey’s highest ever reading. The figure was 5% three months ago. At the same time, a net 44% of respondents believe that corporate profits will deteriorate during the next 12 months and 43% expect operating margins to weaken. The poll’s findings are perceived as surprise, coming after a period when markets seemed to be recovering their poise after the sell-off in May/June, and may have been influenced by the eruption of the Middle East conflict last week. The percentage of institutional investors who are overweight cash is at its highest level since the aftermath of September 2001, and risk appetite has deteriorated to its lowest level since the start of the 2003 Gulf War.
