Fund managers put their cash into banks in November, BofA-ML says

Global fund managers moved out of cash in November and into cyclicals - perhaps too quickly - with the result of the US election accelerating the move and catalyzing the buying of American stocks, according to the results of a widely-followed survey.

According to Bank of America-Merrill Lynch's monthly global Fund Managers' Survey, investors cut their portfolios' cash position from 5.8% in October to 5.0%.

However, BofA -ML cautioned that if cash holdings fell below 4.8% in December then that trend might turn into a "tactical" negative.

Historically, a one percentage point drop over two months triggers a four to six week sell-off, strategist Michael Hartnett and his team said in a research report.

In descending order, month-on-month fund managers rotated into Banks, Healthcare, US and Insurance, and out of Emerging markets, Utilities, Technology, Telecoms and UK.

Protectionism was seen as the 800lb. gorilla in the room, with 48% of respondents describing it as the most substantial risk for financial market stability.

Allocation to Emerging markets was cut sharply, from 31% overweight in September to 4%, while Eurozone stocks improved to a five-month high of 8%-overweight from 5%.

Hartnett and his team believed there would be a trade in so-called bond proxies soon, which includes Utilities and Telcos, but recent events in markets marked a sea-change in the investment landscape, they said.

"But our cyclical view of peak liquidity, globalization and inequality means the ‘yield’ dam has been broken."

A full 44% of the 177 BofA -ML clients who responded to the survey said the rotation into cyclicals would continue well into 2017.

The US dollar (48%) and US dollar (24%) were expected to be the main 'drivers' of equity prices over the following six months, the survey results revealed.

Linked to the above, a net 65% thought yield curves would steepen over the next 12 months.

Those of a contrarian mindset should go 'long' Sterling, UK, equities and proxies.

BofA-ML carried out its survey between 9 and 14 November.