Poll suggests global investors more optimistic
Global investors have started 2012 with a renewed sense of optimism towards the global economy and greater appetite for risk, according to the Bank of America Merrill Lynch Survey of Fund Managers for January.
The survey finds that only a net 3% believe the world economy will weaken in the coming 12 months, down from a net 27% in December. This is the biggest one-month improvement in the growth outlook since May 2009.
Many investors are showing a greater appetite for risk. BofA Merrill Lynch’s Composite Risk and Liquidity Indicator is the highest since July 2011, before the sovereign debt crisis fully emerged. Cash levels have fallen to their lowest levels since July 2011. Cash now makes up, on average, 4.4% of a portfolio, down from 4.9% in December. The proportion of investors taking lower than normal levels of risk has improved to a net 33% of the panel, compared to a net 42% in December.
Geopolitical risk remains a cause for concern. The proportion of respondents viewing geopolitical risk as “above normal” has jumped to 69% from 48% last month. This has, in the past, been correlated with a spike in the oil price.
Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research, said: “Investors are tip-toeing rather than hurtling toward higher risk exposure; the US market and high quality cyclical sectors, such as energy and tech, have been the main beneficiaries of lower cash holdings.”
Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research, said: “Despite improvement in global and European growth expectations, asset allocators remain deeply sceptical towards European equities, especially banks.”
Some of the investors’ more wildly negative views towards Europe have eased, the survey says, though the gulf between the US and Europe as a preferred investment location remains. A net 56% of the global panel believes that the outlook for corporate profits is more favourable in the US than any other region, up from a net 50% in December. A net 70% say the profit outlook for the Eurozone is the least favorable of all regions, compared with a net 72% a month ago.