Volatility fatigue led to extreme weak investor sentiment which has now finally translated in defensive portfolio positioning. Actions speak louder than words. Fund managers surveyed have now taken up their cash balances to extremely high levels. Phenomenal counter indicator. Historical forward returns from high levels of cash are well-above average.
| JUL 2000 | Adelphia Communications fraud had already occurred |
| MAR 2001 | WorldComm accounting fraud already happened |
| MAR 2003 | At the absolute bottom of the stock market sell-off and the start of the HY bond market recovery |
| DEC 2008 | Post Lehman bankruptcy and Great Financial crisis |
| JUN 2012 | Panic after Eurozone debt crisis |
| OCT 2016 | Pre presidential election positioning (market ripped higher after election) |
| APR 2020 | After COVID happened |
| JUL 2022 | Inflation and a slow-moving Fed already underway |
Friends – everyone should view significant cash balances as an enormous bullish sign. Volatility fatigue has finally produced some selling and more cash. This is the most bullish thing I have seen in the markets in 6 months. Finally…..the best and brightest went to cash.
Richard Barrett
Chief Investment Officer
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