New York (HedgeCo.net) – A recent Bank of America Merrill Lynch survey of the company’s money management clients indicates that fund managers are optimistic, but they are also the most cautious they have been in years.

• 31% of those surveyed have some sort of investment protection to protect against a sharp decline in the market. That is the highest percentage holding insurance against a decline since the survey started in 2008.
• Fund managers have raised cash levels as well with 4.9% now on the sidelines, which is above average for the last 10 years.
• 70% of respondents are bearish toward the Chinese stock market and half see the Chinese economy weakening
• 55% believe the global economy will continue to grow over the next year, but that is down from a recent high of 62%.

Market corrections rarely happen when people expect them. In fact, sharp declines usually happen because very few investors see them coming and are not prepared. Then once the selling starts investors panic and sell. With so many fund managers making preparations for a correction, the chances of a correction seem less likely.

Rick Pendergraft
Research Analyst
HedgeCoVest