A recent survey from Bank of America Merrill Lynch reinforces my comments (see: Captive money is not ‘smart’ for investors) about the fee-maximizing bias of financial firms to have client capital fully allocated to risky assets at all times: last month found that cash levels were the highest levels since November 2001 at 5.8% of portfolios:
“Globally, sentiment remains weak. Global asset allocators are holding the highest average cash balance since November 2001, while equity allocations have dropped to four-year lows,” BAML said in a note.
So 94.2% of client savings allocated to risky assets at extreme valuations is considered defensive. This is why so few people are able to buy low in any meaningful way once bear markets arrive. Buy with what? What risk management? It’s a joke, but not funny. See: Forget the stock rally, investors are holding cash.