(Reuters) - U.S. fund managers recommended an increase in cash holdings this month to a three-year high and a cut to equities as persistent concern about a U.S.-China trade war sent stock markets see-sawing, a Reuters poll showed.
Progress in the past week on North American Free Trade Agreement negotiations had led to expectations of further easing of global trade tensions, but the respite for short-term traders was didn’t last.
U.S. stocks ended a four-day winning streak in a broad-based sell-off on Thursday after a report that U.S. President Donald Trump was preparing to step up his trade war with China.
“The biggest risk to the U.S. and global markets is related to mounting trade tensions. While we believe these will be resolved, the process could take longer than many investors want,” said Alan Gayle, president at Via Nova Investment Management.
Average month-to-month allocation changes in Reuters polls are usually slight. The notable change in the latest survey of 12 U.S. fund managers, conducted Aug. 15-30, was the recommended increase in cash to its highest since May 2015.
“With trade still making headlines almost every day, it is best to get into cash and wait for those pockets of opportunities to buy various assets and ignore the buying and selling pressures around at the moment,” said a fund manager at a large U.S. investment firm.
Equity holdings were cut to the lowest in over a year, but still accounted for 56.6 percent of the average model global portfolio from 56.9 percent in July.
Recommended bond holdings were increased to 35.9 percent from 35.8 percent in July and cash allocations to 4.5 percent from 3.5 percent.
Reporting and polling by Rahul Karunakar, Mumal Rathore and Sujith Pai, editing by Larry King