Fund managers up cash weightings as market reaches inflection point

Concern about stretched valuations

Fund managers have been taking a more defensive stance and increasing their cash weightings, with some even pushing towards 20%, as they point to stretched valuations in some parts of the market, while fears grow about the impact of central bank tightening on the fragile global recovery.

Global government bond yields have jumped in the past couple of weeks as central banks have signalled less accommodative monetary policy ahead. However, while the focus has been on prospects for a sequel to 2013's 'taper tantrum', Fidelity CIO of fixed income Charles McKenzie said the big question is not how high government yields will rise, but rather how much central banks can tolerate. "What central bankers should fear most is the concept of 'double tightening' when rising government bond yields and policy rates coincide with falls in risky assets. This is what we have seen hints o...