As UK referendum comes, cash hits record high - June 23, 2016

As UK referendum comes, cash hits record high

Today is the day of UK’s EU referendum and that worries investors. This and other factors make them cautious and lead to a record high cash level at fund managements since 2001. Interestingly, at the same time analysts seem to be positive about the near future, but patience might be an important virtue in the next days.

UK is having an important referendum today: they are deciding if they should stay in or leave the EU. Most analysts and some polls suggest that they will decide to stay. Nonetheless, the referendum worries investors. The German 10-year bond hit a negative yield last week for the first time and one of the main reasons for this was the upcoming referendum.

Another important sign is that “according to Bank of America Merrill Lynch's latest fund manager survey, investors surveyed by the firm now have 5.7% of their net holdings in cash, the highest percentage since November 2001”, wrote Business Insider.

Indeed, it’s a 15-year high and if the British decide to stay, the stocks may go even higher. This weekend’s polls showed that the “remainers” seem to be in majority, the stocks already went up 2-3%.

file

But Business Insider also added that “the concern isn't so much a reaction to traumatizing events like these but an anxious anticipation that something bad will happen.”

There’s and interesting contradiction in this, since 23% of professionals believe that the global economy will grow in the next 12 months, and that is a record high in half a year. Analysts expect a bright future for net company profits as well.

Anyhow, cash is popular among investors and common people, since we are in the era of negative interest rates. That doesn’t motivate people to keep their money in simple savings accounts or bonds, since they can lose its value instead of growing it.

The referendum’s results will be out tomorrow, but one thing is for sure: whatever happens, patience might be important. If the market reacts with falling prices, selling investments might be a bad idea. If we have a long-term, 5 to 10-year investment plan or investment portfolio, waiting for things to turn around is a better idea.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. This is important when considering any investment.