Global fund managers are increasingly bullish about companies’ ability to increase profitability and are showing a growing belief in a robust economic recovery, according to Bank of America Merrill Lynch’s April Survey of Fund Managers.
Respondents predicting “above-trend growth and below-trend inflation” increased to 32% in April, up 11 percentage points from a month earlier, according to a BofA Merrill Lynch news release. Forty-two percent of respondents expect no interest-rate increase in 2010, up four percentage points from March.
Fifty-two percent were overweight equities, up from 33% in February.
“April’s survey shows a growing number of investors envisaging a Goldilocks scenario of above-trend and benign inflation,” Michael Hartnett, chief global equities strategist at BofA Merrill Lynch Global Research, said in the news release. “The findings are consistent with the view that the U.S. consumer, far from remaining in intensive care, is on the path back to good health.”
Respondents also have increased portfolio allocations toward cyclical stocks, with 27% overweight industrials, up seven percentage points from March. Those overweight materials increased to 18%, up six percentage points from March.
Ten percent were underweight banks, down 12 percentage points from March.
Japan equities were up this month, with 12% of fund managers overweight the asset class, the highest level since July 2007. Eighteen percent were underweight eurozone equities.
“As recently as five months ago, investors regarded Europe as the most attractive play on global economic recovery,” Patrik Schowitz, European equity strategist at BofA Merrill Lynch Global Research, said in the release. “But with the Greek debt crisis, Europe has become a no-go zone and asset allocators now view Japanese equities as a cleaner cyclical play.”
Efforts to reach BofA Merrill Lynch officials for further comment were unsuccessful.