Money managers surveyed this month by Bank of America Merrill Lynch are increasingly confident in a global economic recovery despite the still unresolved U.S. fiscal cliff.
A net 40% of respondents think the global economy will strengthen in the next 12 months, a six-percentage-point increase from last month and double the optimism in October, according to the Bank of America Merrill Lynch December Survey of Fund Managers.
The fiscal cliff is still seen as the biggest tail risk, at 47%, but that's down from 54% in November.
Optimism outside the U.S. is soaring as views on corporate earnings and growth in Japan and China increase. A net 67% of respondents said China's economy will strengthen in the coming year, up from 51% in November, which was the highest reading since July 2009.
A net 20% of global asset allocators are underweight Japan, down from 34% last month. A net 90% of Japanese investors expect the economy to strengthen in the next year, up from 18% last month, while a net 81% forecast improved earnings.
Allocations to the eurozone are outweighing U.S. allocations for the first time since November 2010.
According to the latest survey, a net 38% of asset allocators are overweight emerging markets equities, double the level of September's survey.
A net 11% of investors think corporate profits will improve in the coming year, compared to a net 11% in October that thought profits would decline, with a net 38% thinking global emerging markets equity have the best outlook. A net 37% believe global corporate earnings growth will be less than 10%, down from 52% in November.
However, a net 64% said companies around the world are underinvesting, the highest reading in the history of the survey.
A total of 255 money managers with $664 billion in assets under management participated in the survey Dec. 7-13.