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  2. INVESTING & PORTFOLIO STRATEGIES
October 13, 2015 01:00 AM

Fewer managers expect interest rate hike this year — BofA

Meaghan Offerman
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    The Federal Reserve building in Washington, D.C.

    Money managers are increasingly skeptical of a 2015 U.S. interest rate hike, Bank of America Merrill Lynch’s latest monthly fund manager survey found.

    “Amid fragility in the global economy and earnings,” a net 47% of managers now believe the Federal Reserve will raise rates in 2015, down from a net 58% in September, said BofA Merrill Lynch in a news release on the survey results.

    Global growth expectations remain low, but the reading stabilized after September’s big drop, due in part to China’s improving outlook, BofA Merrill Lynch said. A net 13% of respondents now expect the global economy to strengthen over the next 12 months. Additionally, only a net 22% expect a weaker Chinese economy over the next 12 months, down from a net 34% last month. And while the possibility of a Chinese recession continues to be viewed as the biggest tail risk, that reading dropped to a net 39% from 54% last month.

    Investors’ outlook on emerging markets, U.K. and eurozone equities also improved in October. Allocations to U.K. equities and eurozone equities improved to a net 6% underweight and 54% overweight, respectively, compared to a net 25% underweight and 45% overweight last month. Additionally, a net 28% of respondents reported being underweight emerging markets equity, an improvement over last month’s record net 34% underweight.

    Other key findings of the October survey include:



    • A net 10% of investors reported being underweight U.S. equities, up from a net 6% underweight in September;

    • Japanese equity allocations remained relatively stable at a net 23% overweight, compared to a net 22% last month;

    • Allocations to commodities and bonds improved to a net 41% underweight and 23% underweight, respectively, from 50% underweight and 32% underweight in September;

    • Energy allocations improved to a net 22% underweight from a record net 33% last month while industrials fell to a net 2% overweight, the lowest allocation in three years;

    • Average cash levels remain high at 5.1% of portfolios, but down from 5.5% last month;

    • A net 19% of managers believe the current global fiscal policy is too restrictive, up from a net 10% last month; and

    • A net 26% of respondents believe corporate operating margins will decrease over the next 12 months, up from a net 18% last month.

    The survey of 209 money managers representing $512 billion in assets under management was conducted Oct. 2 through Oct. 8.

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