Investors have cut back their holdings in stocks to the lowest level in at least four years, Reuters polls showed on Monday - a sharp reaction to the threats of rising inflation and slowing economies.
Polls of 50 leading investment firms in the United States, continental Europe, Japan and Britain showed the average equity holding in a mixed portfolio of assets dropped to 56.9 percent in June from 59.5 percent in May.
It was the lowest level since at least April 2004, when Reuters began combining the results of its four regional polls. Bond holdings rose to a slightly above average 32.9 percent from 31.2 percent in May. Cash levels rose to 5.5 percent from 5.4, well above the long-term average 4.6 percent holding.
The moves come as central banks have issued increasingly stark warnings about inflation, with oil hitting nearly $143 a barrel on Friday, and developed economies have been slowing. "Inflationary pressures are intensifying, both at home and abroad," said David Joy, chief market strategist at RiverSource Investments in Minneapolis.
Stock markets generally had a brutal month in June, with MSCI's main world index falling more than 8.5 percent with a day's trading or less to go. This stands in contrast to an attempted rally between the end of March and May, before the inflation worries hit. For the year to date, the MSCI index is down around 12 percent.
Investors are particularly concerned that the combination of rising prices, which calls for higher interest rates, and slowing economic growth, which calls for lower, will hamper central banks in their attempts to put things back on track.
"Central banks have changed their message to a more hawkish stance," said Patrick de Fraguier, deputy head of the strategy at Credit Agricole Asset Management in Paris. "Consequently, adjustments are being made to consensus forecasts for growth, inflation, and monetary policy."
US fund managers decreased their high exposure to stocks in June, according to the poll of 15 US-based fund management firms. They held an average of 62.1 percent of their assets in equities, down from 64.4 percent in May. Cash holdings increased to 4 percent in June from 2.5 percent the previous month, while bonds were relatively unchanged at 30.1 percent from 30.4 percent.
Continental European fund managers shed stocks and boosted bonds and cash in a classic risk-aversion trade. The monthly survey of 12 investment houses in continental Europe showed equity holdings fell for a second straight month to 47.1 percent of their portfolio from 48.3 percent in the previous month.
Bond holdings rose to 37.6 percent, their highest since January, from 37.1 percent in May, while cash rose to 4.9 percent, a three-month peak. Japanese fund managers' pessimism over stocks grew for the third month. The poll of 11 Japan-based institutional investors showed their average stock allocation fell to 52.6 percent from 54.7 percent in the previous survey.
Bond allocations rose for a third straight month, to 43.1 percent from 41.1 percent, while the weighting for cash edged up to 4.9 from May's 4.7 percent. British fund managers cut equity holdings to a 12-month low and raised bonds in June. The 12 respondents held an average of 65.8 percent in stocks compared with 70.6 percent in May. Bond holdings rose to 20.9 percent from 16.3 percent while cash was cut to 8.0 percent from 9.7.
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