Sixty percent of global fund managers surveyed by Merrill Lynch this month expect the world economy to weaken over the next 12 months, up from only 5% three months ago. "This is the most negative result in the survey's history, even though few institutional investors expect a full-blown recession within the next year," according to a Merrill Lynch news release. Also, 44% of the managers expect lower corporate profits over the next 12 months, up from 9% in May, and about 20% said there could be "a significant impact on global growth" over the next year if the price of oil reaches $80 a barrel, up from 10% of managers in December, the survey said. On the New York Mercantile Exchange today, crude oil closed at $73.54 a barrel.
Thirty-one percent are overweight in cash, the second-highest reading in five years. Also, 27% described the level of risk they are taking in their portfolio as lower than normal, compared with 11% in May. Risk appetite has been weaker only three times in the past five years, according to the news release: immediately after Sept. 11, during the corporate scandals of 2002 and at the start of the Iraq War.
About 6% were overweight global emerging markets equities in July, down from 10% in June and 35% in May.
Merrill Lynch surveyed 213 managers, overseeing a combined $664 billion in assets, from July 7-13.