Fund managers’ outlook on equity markets improved in July, said Bank of America Merrill Lynch’s monthly fund manager survey.
Of the 179 respondents who responded to the global portion of the survey, a net 61% of respondents reported being overweight global equities, the highest level since early 2011 and up 13 percentage points from June. Meanwhile, a net 64% and 15% reported being underweight bonds and commodities, respectively.
Also, a net 71 % of respondents expect global core consumer price index to increase in 12 months, the highest level since March 2011, and up 13 percentage points from June.
Meanwhile, a net 69% of respondents expect the global economy to grow in the next year, up three percentage points from June.
“Improving investor sentiment on global growth, inflation, equities and risk-taking are all a testament to a potential macro normalization in the second half (of 2014). This could eventually feed into normalization of rates. If growth does pick up, volatility will rise, too,” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch Global Research, in a news release.
Average cash levels remain at 4.5% for the second consecutive month, but down from 5% in May.
Also, 28% of respondents believe Chinese debt defaults and geopolitical events are the biggest tail risks. Last month, 36% of respondents believed Chinese debt defaults were the biggest tail risk.
The survey of 228 fund managers managing a total of $674 billion was conducted July 3-10.