The S&P 500 hit a record high in April, but that hasn't driven professional money managers to new optimism on equity markets overall. According to the latest fund manager survey from Bank of America, they are tempering their enthusiasm for stocks – and have given up on commodities.
"Global investors are moderating their earlier exuberance in the face of somewhat lower conviction over global growth, though they remain positive towards equity markets overall," Bank of America said in a release.
The numbers: Cash levels are at their highest in six months – at 4.3 per cent, up from 3.8 per cent previous, which is considered a sharp move upwards. And a net 49 per cent of respondents believe the global economy will strengthen in the next 12 months, down 12 percentage points from March.
"While the threat of a U.S. fiscal crisis has largely receded, anxiety over the euro zone and new risks – particularly the potential for conflict in Korea – has intensified. A 'hard landing' in China also remains a concern," the statement said.
Still, this doesn't mark a broad retreat. Bank of America pointed out that fund managers have retreated from the euro zone and emerging markets, but have increased their exposure to the U.S. equity market to a 10-month high and have boosted their exposure to Japan to its highest level since 2006.
In terms of sectors, commodities have fallen far out of favour: Materials exposure is at its lowest level since the start of 2009 and energy exposure has fallen to a record low. April's results also show a rotation from cyclical sectors, such as technology stocks, banks and consumer discretionary stocks, toward the telecom sector.
So, if you like to run against the herd, there are some clear contrarian signals here, as Bank of America itself pointed out. Fund managers have capitulated on commodities, making them potentially attractive since perhaps all the selling has been done.
More broadly speaking, Bank of America believes that the overall cash level of 4.3 per cent is close to a contrarian "buy" signal of 4.5 per cent.