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Aug 16

Fund managers running a lot of cash – and that’s bullish

  • August 16, 2022
  • CWM Investment Team
  • Richard Barrett

When we quote investor “sentiment”, there’s three big data points we look at: the put/call ratio, the bull/bear ratio, and what’s going on within the Bank of America Fund Managers Survey. When everyone is buying calls, when everyone is bullish, and when fund managers are running little to no cash in portfolios that usually translates into future trouble. Those moments usually coincide with a punch bowl on the table, loud music, and plenty of singing/dancing. Too euphoric.

Forward returns actually look better when put buying > call buying and bears greatly outnumber bulls. That’s where we are now. The data within the BofA Fund Managers Survey also looks constructive. While fund managers have chased some equity risk in the past few weeks (adding to technology and communication services names and selling down utilities and staples), gross cash exposure within their portfolios remains high. The chart below captures the other rare observations of when fund managers are holding >5% cash in portfolios. It happens rarely and FORWARD RETURNS from such rare observations are very good. The last time cash was as high in this survey was April 2020 = AFTER we got hit by COVID and AFTER the market had already sold off -30%. High cash balances are symptomatic of market bottoms, not market tops.

FTD = follow the data

Source: BofA Fund Managers Survey, JonesTrading LLC as of August 15, 2022

Richard Barrett
Chief Investment Officer


Congress Wealth Management LLC (“Congress”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. For additional information, please visit our website at congresswealth.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with Congress’ CRD #310873.

This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on Congress’ research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.

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    Congress Wealth Advisor Solutions (CWAS) is a division of Congress Wealth Management, LLC (CWM), which is a registered investment advisor with the U.S. Securities and Exchange Commission. For additional information, please visit the Investment Adviser Public Disclosure website by searching with CWM's CRD #310873. Investment Advisory services are offered and rendered through CWM. CWM acquired Pinnacle Advisory Group, Inc. (Pinnacle) on April 30, 2021.