Fund managers continue to be very cautious about the overall outlook for the economy, despite the recent rally in the equity markets, according to Merrill Lynch's latest global fund manager survey. In general, fund managers believe that the business cycle is in its "late cycle" phase and that general market activity will weaken in the coming 12 months, according to the survey. Only one-third of the 210 managers surveyed said that they expect double-digit corporate earnings growth over the next year. While they expressed general concerns, however, these managers did not indicate that they expect the slowdown to develop into a recession.
Also, even though fund managers remain cautious about the economy, the decline in oil prices during the last two months has "shaken them out of their risk aversion and prompted them to put their high cash balances to work," according to a report with the survey. Fund managers surveyed said they are now less averse to risk than they were earlier in the year, and their collective cash balance has dropped to 3.8% in September, down from 4.4% in August.