Are investors building for a fall?

July 30, 2009

Reuters has taken its monthly snapshot of the investment choices of leading fund management houses across the world. At the end of July, the picture painted was one of investors embracing risk and shutting down their safest holdings.

Equity holdings as a percentage of a typical balanced portfolio were at their highest since the end of August last year, just a couple of weeks before Lehman Brothers collapsed. Here is what has been happening to equity holdings this year: 

At the same time, cash holdings have been cut back drastically. They are now at a level last seen in May 2007.  Here’s what that looks like:


Bonds offers a more mixed picture, but the latest month still shows a retreat that would be typical of roaring risk appetite:

Now the big question. Does all this add up to the start of a meaningful, long-term bull market? Or is it just overly optimistic exuberance?


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I think of the latter. Every investor is trying to recover some of their losses. This is not good. They are hyping the state of the economy. Commodities, such as oil, will follow this trend. Neglecting the fundamentals like supply and demand. Why is it like this for the commodities especially for oil? No solid basis. Always look at every upward trend even it is artificial.

Posted by francis | Report as abusive

The amazing thing about financial markets is that as long as everyone believes in a rally, it’s real…until, that is, something happens to remind them that economic fundamentals are still in the toilet, and will be for as long as we keep using excessive leverage to create ‘wealth’. Big fall coming.

Posted by hariolor | Report as abusive

Uh, the market will fluctuate?

Cosmic P/E on SPY was like 17 when I looked this week. Up a tad above average, but not Krispy Kreemeish. So give a little, take a little. Good news that heavies are starting to ante in. BBC was calling this the ‘Office Boy’ rally earlier this month.

Posted by Xenophon | Report as abusive

Plain and simple, its one big game of “Follow the leader”
As long as your following pretty close behind, odds are your going to cut a small profit, make sure your not lagging behind though otherwise you might just be the one getting undercut.

With the recession prices deflating the market, it dosnt really matter what you are investing in right now as long as your ready to wait it out (and hope your companies makes the cut without going bankrupt).

Posted by Dominic | Report as abusive