“More than two- thirds of the fund managers surveyed in Merrill Lynch’s (MER) latest monthly survey said markets were facing stagflation”, the Financial Times reports. Stagflation occurs in an economic climate of high inflation combined with declining growth.
Due to the high level of risk aversion, “a net 41% of fund managers are ‘overweight’ cash – a level last seen in the aftermath of the 9/11 attacks.” As the FT points out, that’s a seven year cycle, and seven year cycles relate to Saturn, the planetary energy relating to business contraction and caution. With Jupiter, the planet of growth in Capricorn, (a sign ruled by Saturn), credit and growth is more prone to contract than expand. Since Jupiter and Saturn are currently in earth signs, that fear expresses itself by seeking shelter in the safest of financial instruments. You don’t gain or lose by holding cash. (Inflation erodes the value of cash, but I digress.)
Fund managers are in a difficult dilemma. Realistically they can’t stay on the sidelines indefinitely holding cash. Besides helping the banks profit on a larger yield spread, the Federal Reserve’s rate reductions are a siren song to lure investors into stocks to get a higher investment return than parking cash in low interest rate Treasuries or Certificates of Deposit.
According to the survey, “A net 10% of fund managers would like to ‘overweight’ the US equity market over the next 12 months.” My opinion is to be patient. Identify what stocks you want to own, look at its technical chart’s historical price support levels (I like to go back at least seven years, or however long I can), set up price targets, and wait for the stocks to come to you.