The world economy is on the mend despite problems in Europe, but investors are still scared and react by retreating to cash every time they hear bad news, Jim O'Neill, chairman at Goldman Sachs Asset Management, told CNBC on Tuesday.
Investors are "obsessed" with the problems in Western economies , but actually the U.S. economy is recovering , and in Europe there are some countries that are doing better than others, O'Neill said.
"Generally speaking, cash is king; people are really reluctant and cautious," he said, citing the example of last week, when at the first sign of disappointment in Europe after some bad economic data investors were in a "panic." "That is the mood across the board," O'Neill added.
This mood makes it hard for investors to get back into stock markets because the focus is on short-term results, he explained.
"At the core of it, everybody worries about the next quarter and, linked to it, the volatility of last year is what scared a lot of longer-term investors. It's tough for a lot of pension fund trustees to live through that," O'Neill said.
Added to this is the fact that the past decade has been weak for stock markets so "there's a broad anti-equity culture out there," he said, but added that the prospects for stocks are good.Page 1 of 5 | Next Page