Fund managers are feeling better than they have in a long time about the prospects for the global economy, according to the Merrill Lynch Fund Manager Survey released Wednesday.
It reports that optimism about the global economy has soared to its highest level in nearly six years, as 75% of survey respondents believe the world economy will strengthen in the coming 12 months (the highest reading since November 2003), up from 63% in July.
Confidence about corporate health is also at its highest level since January 2004, Merrill noted, with 70% expecting global corporate profits to rise in the coming year, up from 51% last month.
August’s survey shows that investors are putting their money where their mouths are, with average cash balances falling to 3.5% from 4.7% in July, their lowest level since July 2007. Equity allocations have also risen sharply month-over-month, with 34% of respondents overweight the asset class, up from 7% in July. Merrill Lynch’s Risk and Liquidity Indicator, a measure of risk appetite, has also risen to its highest level in two years.
“Strong optimism in August represents a big turnaround from the apocalyptic bearishness of March. And yet with four out of five investors predicting below trend growth for the year ahead, a nagging lack of conviction about the durability of the recovery remains,” said Michael Hartnett, chief global equities strategist at Banc of America Securities-Merrill Lynch Research. “The equity rally has been narrowly led by China and tech stocks. We have yet to see investors fully embrace cyclical regions such as Japan or Europe, or Western bank stocks.”
Indeed, Merrill noted that 33% of the panel prefers to overweight emerging markets, while the consensus is to remain underweight the U.S., the eurozone, the U.K. and Japan.
Technology remains the number one sector, with 28% of the panel overweight the industry, Merrill reported. Industrials and Materials lag with global fund managers holding 11% and 12% overweight positions respectively, it said. They are also 10% underweight in banks.
A total of 204 fund managers, managing a total of US$554 billion, participated in the global survey from August 7 to 12.
IE
Optimism about global economy is growing: survey
Equity allocations have risen sharply month-over-month
- By: James Langton
- August 19, 2009 August 19, 2009
- 11:13