Fund managers stay put on cash after US elections, BofA-ML survey shows

Many of the world’s largest fund managers said they were shifting funds towards the S&P 500 following the result of the 2016 US elections, but in a possible sign of caution, the majority opted to stay put on their accumulated cash piles.

According to Bank of America-Merrill Lynch’s ‘flash’ Fund Managers Survey, published on 10 November, 59% of investors said the election victory by Trump would not affect their cash holdings.

Another 21% said they would cut their cash positions, while 20% said they would increase it.

The three most popular post-election trades were: buy S&P 50 (30%), buy gold/sell risky asset (27%), buy US dollar (10%).

“Initially, election not seen as "game-changer" for rates & EPS; risk-on moves in past 36 hours tactical not yet fundamental in nature,” BofA- Merrill strategist Michael Hartnett said in a research note sent to clients.

Significantly, perhaps, 46% thought the odds of a December rate hike by the US Federal Reserve were now lower, although 14% believed the opposite.

“This reflects "policy uncertainty" narrative and explains why US corporate tax repatriation hopes not yet leading to extreme bullish view of US dollar,” BofA said.

Political risk was clearly on investors’ radar, with 57% judging that the US election did not mark a peak in the global political risk premium.

That, BofA said, “helps explain why investors initially reluctant to reduce cash; concerns over US politics, hard Brexit, European elections not yet allayed by result.”

A full 46% expected the new administration in Washington DC would approve a tax repatriation/infrastructure spending bill in the first 100 days.

Only 5% expected new trade policies.

“Investors discounting fiscal stimulus not protectionism post-election.”

A total of 114 global FMS investors across BofAML's equity, FX & rates platform were canvassed for the 'flash' FMS.