Money managers are increasing their cash holdings and reducing allocations to commodities, said Bank of America Merrill Lynch’s monthly fund manager survey.
A net 28% of investors reported being overweight cash in December, up 15 percentage points from November, while a net 26% were underweight commodities, the lowest reading in 12 months and up eight percentage points from the previous month.
Sentiment toward U.S. and Japanese stocks also worsened in December. A net 16% of respondents reported being overweight U.S. equities and a net 40% were overweight Japanese equities, down nine and five percentage points, respectively, from last month.
Falling oil prices led investors to reduce their energy and materials exposures. A net 23% and 27% of respondents were underweight energy and materials, respectively, in December.
Money managers’ outlook on global growth is improving, however. A net 60% of respondents expect the global economy to strengthen over the next 12 months, up 13 percentage points from November and 27 percentage points from October.
Also, investors are increasing their allocations to eurozone equities amid expectations the European Central Bank will launch a quantitative easing program in the first quarter. A net 26% of respondents reported being overweight the asset class, up 18 percentage points from last month and a net 19% now regard the asset class as undervalued, up seven percentage points from November.
On inflation, a net 20% expect higher global consumer prices in the next 12 months, down 15 percentage points from last month. Also, a net 69% of respondents consider deflation a big risk in 2015.
The survey of 214 fund managers managing a total of $604 billion was conducted Dec. 5-11.
