BofAML Fund Manager Survey: Investor Confidence in Global Outlook Waning

Jan 20 2016 | 10:32pm ET

Investors are significantly less confident in the global economic outlook, according to  BofA Merrill Lynch’s latest fund manager survey. Unsurprisingly given the market’s volatility since the start of the year, the survey found that managers are cutting exposure to equities while raising cash holdings.

A mere 8% of fund managers responding to the survey believe the global economy will strengthen over the next 12 months, according to a statement from BofAML. The reading is the lowest on this measure since 2012. Nonetheless, just 12% believe a global recession is around the corner, and a slowdown in China is now the viewed as the biggest “tail risk” by managers.

Other key findings from the survey include:

  • More respondents now think global profits will decline over the next 12 months than increase, the first negative reading in over three years.
  • More than 50% of respondents think the Fed will be limited to no more than two interest rate hikes in the next year, up from 40% a month ago.
  • Long U.S. dollar remains the most crowded trade, but bullishness on the currency is waning.
  • Average cash balances are up to 5.4%, the third-highest reading since 2009. A net 38% of investors are now overweight cash.
  • Net overweights in equities have halved to a net 21% from December’s net 42%, while bond underweights have retreated.
  • Bearishness towards global emerging markets equities has increased to a record level. Europe and Japan remain the most favored stock markets.

“Investors are not yet ‘max bearish’,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, in the statement. “They have yet to accept that we are already well into a normal, cyclical recession/bear market. 

“Bullishness towards Europe remains intact, but conviction is rooted to the floor. The positioning gap between the most and least preferred sectors is the lowest in two years,” added James Barty, head of European equity strategy.

BofAML’s Fund Manager Survey for January included 211 panelists with $610 billion of assets under management, while a total of 173 managers, managing $499 billion, participated in the global survey and 96 managers, managing $228 billion, participated in the regional surveys.

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