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Money Management

48% of managers think global monetary policy is ‘too stimulative’ — BofA Merrill Lynch

Federal Reserve Chairwoman Janet Yellen

A net 48% of money managers believe global monetary policy is "too stimulative," the highest reading since April 2011 and up from a net 47% in June, said Bank of America Merrill Lynch's monthly fund manager survey released Wednesday.

The July survey also found that a crash in global bond markets and a policy mistake by the Federal Reserve or European Central Bank are viewed as the biggest tail risks to the market, according to 28% and 27% of managers, respectively.

On global growth and profit expectations, only a net 38% of investors predicted a stronger economy over the next 12 months, down from a net 39% in June and a net 62% in January. Additionally, only a net 41% of investors predicted global profits will improve over the next year, the lowest reading since the U.S. election and down from a net 43% in June. Corporate earnings expectations also fell in July, with a net 22% predicting corporate earnings will not improve over the next 12 months, vs. a net 10% last month.

Other findings from the July survey include:

  • Average cash holdings fell to 4.9% of managers' portfolios, down from 5% in June but still above the 10-year average of 4.5%; managers cited a bearish view on markets (25%) and a preference for cash over low-yielding investments (20%) as reasons they are overweight cash.
  • Global bond and commodity allocations rose to net underweights of 55% and 6%, respectively, vs. net underweights of 58% and 15% last month.
  • Global equity, U.S. equity, eurozone equity, U.K. equity and emerging markets equity allocations fell to a net 38% overweight, net 20% underweight, net 54% overweight, net 30% underweight and net 37% overweight, respectively, vs. a net 40% overweight, net 15% underweight, net 58% overweight, net 23% underweight and net 42% overweight in June.
  • On the flip side, Japanese equity allocations rose to a net 18% overweight, up from a net 1% overweight last month.
  • A net 80% of investors believe the U.S. is the most overvalued region for equities, down from a record net 84% in June; meanwhile, a net 19% and 43% of managers, respectively, believe eurozone equities and emerging markets equities are undervalued, compared to a net 18% and 48% last month.

The survey of 2017 money managers representing $586 billion in assets under management was conducted July 7-13.