Insto investors switch to cash | Australian Markets

The financial disruption being wrought by US President, Donald Trump, has manifested in institutional buyers pulling back their risk exposures.

It has additionally led to buyers switching out of publicity to US equities and transferring to European equity publicity.

The latest State Avenue World Markets Threat Urge for food Index fell back to 0 in February, ending a four-month run of risk searching for exercise.

The evaluation mentioned that long-term investor allocations to equities fell sharply from close to their highest stage in 16.5 years with the money transferring into money holdings.

Commenting on the index, State Avenue World Markets head of macro strategy, Michael Metcalfe mentioned buyers’ fourth month run of risk searching for exercise “decisively broke” in February as incoming US financial information raised issues that growth has abruptly stalled, offsetting hopes of more stimulus from China.

“But how and where investor sentiment changed was, perhaps even more telling than the headline change in sentiment itself,” he mentioned.

“For some months now buyers’ holdings in equities relative to fixed income have been exceptionally stretched. However as soon as again in February, when investor holdings of equities did fall, the first beneficiary had been allocations to money not fixed income. So whereas buyers are eager to de-risk and transfer their mixture equity holdings nearer to average benchmark ranges, they continue to be hesitant on fixed income.

“Given how concentrated investor holdings in equities and international exchange markets have been, it’s maybe unsurprising that February’s transfer back to benchmark confirmed vital regional variations. Investor holdings of US equities, and within that tech, bore the brunt of the correction with each seeing vital reductions in buyers’ chubby positions.

“European equities were the major beneficiary of flows out of US equities such that long-term investors have now completely unwound their underweight in the region’s equity markets. For now sentiment toward emerging markets by contrast did improve, but like fixed income allocations, remains a little more circumspect. One exception here is Chinese equities which have continued to receive inflows such that long-term investors by our metrics have now eliminated their underweight position.”