Dow Creeps Higher but Fearful Money Managers Exit Stocks Fast

Published:

18/06/2019 07:47

EST. Journalist:


By CCN Markets: Dow Jones futures rose on Tuesday, but money managers on Wall Street aren’t convinced the stock market rally has longevity.

Billion-dollar investors are pulling money out of stocks and piling into cash, according to a survey by Bank of America Merrill Lynch. The investors, who manage $528 billion between them, are also cycling into defensive investments and treasury bonds.

It’s a sure sign that investors are building defensive portfolios in the face of trade war fears and weak economic data.

Dow creeps higher on hopes of Federal Reserve rate cut

As of 6.44 am ET Tuesday, Dow Jones Industrial Average (DJIA) futures climbed 82 points higher (0.31 percent), implying a green open at the bell. The Dow is set to extend yesterday’s tentative gains, powered by hopes of the first US interest rate cut in 11 years.

Dow futures climbed higher on Tuesday, but are investors ignoring the warning signs from Wall Street? Source: Yahoo Finance

S&P 500 futures followed suit, pushing 10 points higher (0.37 percent) to 2,902. The tech-heavy Nasdaq Composite futures climbed 55 points (0.73 percent) to 7,589.

Recession coming to shake the stock market?

The Bank of America survey revealed that money managers are closing positions in tech and banking stocks. Instead, they’re allocating portfolio funds to fixed income investments, utilities, and cash positions.

Bank of America strategist Michael Hartnett said this exodus of Wall Street money from stocks is a recession warning sign. It echos recent recession warnings from JP Morgan and Morgan Stanley.

“Fund manager survey allocation is implying recessionary conditions.”

Cash allocations have spiked the most since 2011, when the market plagued by the debt ceiling crisis. Meanwhile, the unwinding of stocks is the second-largest drop on record.

Dow at risk from trade war and weak economic data

Unsurprisingly, the money managers cited the ongoing Sino-American…

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