HomeFinancial MarketsLess Cash and Fewer New Investors Leave Stocks Vulnerable

Less Cash and Fewer New Investors Leave Stocks Vulnerable

Several indicators have left equities vulnerable amid a recent surge in bond yields and concerns over China’s economy. Signs of a strengthening U.S. economy and cooling inflation spurred inactive investors into action, meaning that there is now less cash and fewer sidelined investors to win over to boost stocks going forward.

“There was plenty of pessimism in the market earlier this year and that shift from pessimism to optimism was fuel for a rally,” Willie Delwiche, strategist at Hi Mount Research observed. “We saw it quickly go from too much pessimism to excessive optimism, and now we are starting to see that roll over.”

BofA Global Research released a survey of fund managers that showed that cash allocations dropped to 4.8% in August—its lowest level in 21 months—shifting its “cash rule” indicator from “buy” to “neutral”. According to the survey, fund managers are the least bearish they have been since February 2022.

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