Pension fund managers fears of inflation diminished to their lowest levels since late 2001 in the August Merrill Lynch Survey of Global Fund Managers.
The survey reported 18% of the respondents expect global core inflation to fall in the coming 12 months; in the June survey, 33% thought inflation would rise. The reversal was linked to the recent drop in oil prices and growing evidence of global economic recession, according to a report on the survey. Recession fears have also prompted a reduction of corporate borrowing, the report added.
The message from investors to corporations is that if we are headed for a recession, they should clean up their balance sheets and prepare a financial buffer, wrote Karen Olney, chief European equities strategist at Merrill Lynch and the reports co-author. As banks de-lever, non-financial corporations will have to wake up to a far less flexible world of credit.
The report also said given the economic downturn spreading to the eurozone and certain emerging markets, global investors are starting to view U.S. assets as attractive. The survey reported respondents said the U.S. has a better corporate profit outlook and higher earnings potential than the eurozone.
A total of 193 global fund managers, managing a total of $611 billion, were surveyed Aug. 1-7.