If the darkest hour is just before the dawn then brighter skies cannot be too far away. When you consider the events of the last two decades, let alone the last six months, it’s no surprise investors are feeling pretty gloomy.

A dot-com crash, a Great Financial Crisis, a pandemic and the largest conflict in mainland Europe in a generation or more would be enough to turn even the world’s greatest optimist glum.

And the current inflationary spiral has seen many investors, both ordinary and institutional, take fright.

According to Bank of America’s latest survey of fund managers, covering 293 managers who between them steer more than $800 billion in assets, average cash levels have, at 6.1%, reached their highest level in 20 years.

While this is a clear indication of how cautious the markets are right now, it may also suggest some strategic thinking on the part of the professionals who reckon a sell-off may be coming and want to have capacity to snap up any opportunities which may arise.

This is something you could consider with your own portfolios. Take a good hard look at your investments.

If there’s anything which no longer adds up – not just because its value has fallen but because the investment case has changed in some way – then cashing out and waiting for a chance to put this money to work when markets are volatile could be a good strategy.

When there are waves of selling, people tend to be fairly indiscriminate and exit stocks which, on a long-term view, continue to have plenty of potential.

We’ve already seen examples of this and no doubt we will see quite a few more in the coming months, Shares will certainly be looking to seize these moments when they arrive.

Equally, if you have time on your side, sitting tight is not a bad policy as, even if there is more pain to endure, you don’t want to miss out on any recovery when it comes.

But, returning to the wider point, if people are overtly bleak about the outlook then it probably bodes well for stock markets. As we discuss in our main feature this week, there are reasons to believe that, globally at least, inflation may be close to or even past its peak.

There is no room for complacency but equally a bit of perspective and at least a small dose of optimism can’t hurt.

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