Cash levels trigger buy signal

Fund management cash levels have jumped to their highest level since the Lehman crisis, according to the BofA Merrill Lynch Fund Manager Survey for July, and BofAML Chief Investment Strategist Michael Hartnett says this is a contrarian buy signal.

Cash levels have soared to 5.5%, their highest level since December 2008 (and prior to that November 2001). Hartnett uses something called the “Fund Manager Survey Cash Rule”, to determine if a trading signal has been triggered. The rule states that when average cash balance rises above 4.5% a contrarian buy signal is generated for equities. When the cash balance falls below 3.5% a contrarian sell signal is generated.

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Fund Manager Survey
An overall total of 191 panelists with US$510 billion of assets under management participated in the survey from 2 July to 9 July 2015. A total of 149 managers, managing US$399 billion, participated in the global survey. A total of 90 managers, managing US$196 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS.