Investors remain cautious, according to the latest fund manager survey from Bank of America (BofA), as cash remains at elevated levels and stockmarkets are seen as overvalued.
The number of fund managers that believe the stockmarket is ‘overvalued' fell back from June's survey but remained at all-time highs of 71% in July. Meanwhile, cash levels within institutional funds increased to 4%, from 3.3% in June; retail funds' cash weightings decreased slightly to 4.8%, from 5.2%.
The most crowded trade, meanwhile, remained ‘long tech and growth', as so-called ‘work from home stocks' thrive amid the coronavirus pandemic leaving most office workers in situ. At 74% of respondents, July's reading for most crowded trade was the highest ever recorded.
Elsewhere, a second wave of coronavirus cases took the crown for ‘biggest tail risk' for the fourth month running, as parts of both China and the US have recorded higher cases in recent weeks and a re-establishment of lockdown protocol.
Bank of America said the survey showed "investor sentiment remains cautious", with the "consensus positioned for bad news on virus, macro [and] election". Analysts expect "choppy summer prices".
While 72% of those surveyed expect stronger global growth, the consensus remains the recovery will not be ‘V-shaped'. In fact, the amount of people who are calling for a ‘V-shaped' recovery fell to 14%, from 18% the previous month.
A ‘U-shaped' recovery continued to be most likely at 44%, up from 43%, but those seeing a ‘W-shaped' curve rising most, to 30% from 21%.
While the US election may cause some investors to react, with 31% suggesting they will reduce risk exposure, 34% said they were likely to do nothing.
With oil prices recovering from their steep 2020 falls and gold continuing to buffer portfolios, allocation to commodities hit a nine-year high with a net 12% of investors now overweight the asset class.
Elsewhere, Europe looks to be coming into favour. Just over a fifth of respondents said they would like to overweight the EU in the next 12 months, up from 14% in June. Meanwhile, 42% believe the euro will appreciate, compared to 30% last month.