Investors are Shifting Assets to Cash from Commodities; Should You?

According to a Bloomberg survey Thursday, global investors plan to put more of their money in cash and less in commodities over the next six months. The report comes as commodities continue to sit at high prices and the U.S. dollar is weak against many major foreign currencies. The survey notes that "Almost 1 in 3 of those questioned say they will hold more cash, while 30 percent intend to reduce investments in commodities, according to a quarterly Bloomberg Global Poll of 1,263 investors, analysts and traders who are Bloomberg subscribers. Both results were the highest since the survey began asking the question last June." 40% of respondents in the survey, taken May 9-10, expect crude oil prices to fall in the next six months. Further, fewer than 4 in 10 of those surveyed described the U.S. and global economies as improving. It appears that a notable portion of the investors in this survey are done riding the commodity "wave" and are now resorting to safety measures. Many market watchers remain weary of the economic recovery and will continue to protect assets, especially after the recent recession. Should you consider such a move? Evaluate your risk exposure and your desire to grow net assets or protect them. It's likely that some of the respondents made their cash increase as a precautionary move - not a speculative one. Cash is safe and dependable, and many people just feel more comfortable that way. With that said, some of the investors could be seen taking a "short" position on commodities, and a "long" position the U.S. dollar. Put another way, they are betting that commodities will fall in price, while the dollar will gain in value against other currencies. In light of ongoing European economic problems, a renewed focus on U.S. fiscal discipline and an extended dollar slide - this could be making a speculative trade in hopes of profit. Either way, make an effort to protect yourself with diversification. Never make an disproportionate portfolio move without understanding the deep implications of over-saturation.