Money managers are more optimistic about global growth and profits and are reducing their cash holdings as a result, said Bank of America Merrill Lynch's monthly fund manager survey released Wednesday and conducted after the U.S. presidential election results.
A net 35% of managers expect the global economy to improve over the next year, the highest reading in 12 months and up from a net 19% in October, while a net 29% expect global corporate profits to improve over the next 12 months, the highest reading in 15 months and up from a net 10% last month.
Meanwhile, average cash holdings declined to 5% of managers' portfolios in November, down from 5.8% in October and marking the largest monthly decline since August 2009.
The November survey also found that while a net 85% of managers expect higher global consumer prices in the next 12 months, the highest reading since June 2004 and up from a net 70% last month, 22% expect below-trend growth and above trend-inflation over the next 12 months. A “stagflation” crash in the bond market was cited as the biggest tail risk by 23% of investors.
Emerging markets equity allocations fell significantly in the month to a net 4% overweight, down from a net 31% overweight last month.
In a news release accompanying the survey, BofA Merrill Lynch officials wrote that the U.S. election result was seen as “unambiguously positive for nominal GDP,” and the election accelerated “rotation into banks, out of high-dividend yield and bond proxies and (catalyzed the) buying of U.S. equities (and selling of ) tech and emerging markets.”
Other significant findings from the November survey include:
- Despite improved global growth, profit and inflation expectations, managers' equity allocations fell to a net 8% overweight in November, down from a net 11% overweight in October;
- U.S. equity and eurozone equity allocations rose to net overweights of 4% and 8%, respectively, up from a net 7% underweight and a net 5% overweight last month;
- Japanese equity and U.K. equity allocations fell to a net 5% underweight and a net 35% underweight, respectively, vs. a net 3% underweight and a net 27% underweight in October;
- Bond allocations improved to a net 48% underweight, vs. a net 50% underweight in November, while commodity allocations fell to a net 2% underweight from a neutral reading last month;
- A record net 56% of investors think current global fiscal policy is too restrictive, up from a net 43% in October; and
- 84% of survey respondents believe protectionism is the biggest risk to financial market stability, the highest reading since 2009.
The survey of 177 money managers representing $456 billion in assets under management was conducted Nov. 9-14.