I am not a fan of cash and bank deposits as a form of investment. The returns are poor - in fact right now bank deposits show very low or even negative real interest rates which makes them a losing investment. I even take this to extremes and do not have a planned emergency fund.
However not holding a lot of cash has two problems:
1. opportunity cost: when opportunities arise, you need to means to exploit them. If markets continue downwards I may end up wishing I had more cash to buy investments cheaply;
2. exposure to market risk: a no (or low) cash position means that I am fully invested. This means I am fully exposed to market fluctuations. Most of the time this is a good thing as markets tend to trend upwards over time. However, there are times when the markets go down and being fully invested is, in the short term at least, painful.
I know I can't expect to time the market with any degree of accuracy, so have no plans to change my approach. The above represents nothing more than a wish to have my cake and eat it too.