ING Investment Management (ING IM) has stated it is expecting an equity market consolidation after the recent strong rally.

It claimed investor sentiment and cash levels offer support for equity markets but other tactical indicators such as strong equity issuance are starting to weigh on markets, pointing to a period of consolidation.

Ad van Tiggelen, senior strategist equities at the asset management arm of ING said: "Equity markets have rallied strongly in part due to the 'wall of money' contributed by policymakers to shore up the financial system, rising confidence and heightened risk appetite. With low yielding US money market funds huge in relation to the size of the equity market, investors have been allocating their high cash weightings into risky assets such as equities, high yield bonds and commodities."

van Tiggelen said there were some tactical indicators which were currently providing red flags for equity markets in the coming months. He added: "One of these is the high volume of new equity issuance. This has recently expanded to 2.5% of total market capitalisation, driven partly because of the issuance activity of banks. This new issuance mops up considerable quantities of excess cash in the market, putting a brake on equity market momentum."