About 57% of money managers globally believe the world economy will improve in the next year, up from 26% a month ago, according to a monthly survey published today by Banc of America Securities-Merrill Lynch Research.
Powered by more optimism on emerging market equities, particularly in China, 40% of the managers surveyed planned to overweight emerging markets in the next year.
Average cash holdings have fallen to 4.3% from 4.9% of their investment portfolios, and investors have also moved to a net underweight position in bonds for the first time since August, according to the May 8-14 survey of 220 money managers who run a combined $617 billion.
“Investors are finally opening their wallets and reducing cash balances to midcycle levels to buy equities, cyclical stocks and risky assets,” Michael Hartnett, co-head of international investment strategy at Banc of America Securities-Merrill Lynch, said in a news release about the survey. “However, this rush to take on risk, especially in emerging markets, is reminiscent of bubble-like behavior.”
In this month’s survey, a net 18% of respondents believe global profits will improve in the next year. A month ago, the 12% more managers were bearish about profits than were the bullish.
More than a quarter of the managers surveyed this month believe earnings-per-share growth will top 10% in the coming year. However, the majority of managers worldwide are still underweight in equities, particularly Japan, the eurozone and the U.K., according to the survey.
“The recharged optimism of fund managers is not fully matched by asset allocators,” according to Mr. Hartnett.
