Mon, Dec 22, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

BofA Merrill Lynch survey finds US investors increasingly confident

Tuesday, March 19, 2013
Opalesque Industry Update - Increasing confidence in the outlook for the U.S. dollar and U.S. equities is offsetting investors’ renewed concerns over China, according to the BofA Merrill Lynch Fund Manager Survey for March.

This month registered the highest level of dollar bullishness in the survey’s history. A net 72 percent of respondents now expect the U.S. currency to appreciate over the next year, a 30-point increase in a month. Bearishness on U.S. stocks has also reversed. A net 5 percent identify the U.S. as the regional market it most wishes to overweight, compared to January’s net 19 percent underweight. The U.S. also offers the best outlook of any region for corporate profits by far, investors believe.

Against this background, investors remain positive on the global economy’s recovery and continue to increase exposure to equity markets. A net 61 percent expects macroeconomic performance around the world to strengthen over the next year, a slight increase on last month’s reading. A net 57 percent of asset allocators are now overweight equities, up from a net 51 percent in the two previous months.

This positive stance offsets a gloomier view of China. Only a net 14 percent of regional investors now expect the Chinese economy to be stronger in a year’s time. This represents one of the sharpest falls in this reading in the survey’s history. Significantly increased fears of a hard landing in China are reflected in a shift out of emerging market equities and into developed markets (mainly the U.S. and Japan).

“Relative U.S. economic outperformance on the back of the housing market’s ongoing improvement and the energy independence story will lead a secular uptrend in the dollar. U.S. equities’ leadership in the ‘Great Rotation’ suggests developed market equities are the likeliest winner in this scenario,” Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, said. “A disconnect between European investors’ increasing optimism about the region and global investors’ continued caution over Europe is also apparent in the survey,” added John Bilton, European investment strategist.

European enthusiasm emerges
European fund managers have adopted a much more positive outlook for the region’s economy. A net 40 percent now expects it to strengthen over the next year. This compares with a net 8 percent two months ago.

This stance is also reflected in expectations of corporate performance. While a net 73 percent judged in January that consensus earnings estimates for European companies were too high, this figure has more than halved to a net 34 percent now. The largest single group of respondents (40 percent) regards estimates as about right, while a net 17 percent expect corporate earnings in the region to improve over the next 12 months. At the end of last year, this reading was consistently negative.

Global investors are taking a more cautious view, which is evident in reduced positioning in European equities. They now have a net 4 percent overweight in the region.

Risk appetite slightly reduced
While global investors’ stance towards equities remains constructive, their risk appetite slipped back slightly this month. The ML Risk & Liquidity Composite Indicator declined by one percentage point month-on-month, its first fall in nine months. Even so, this measure remains well above its average over the past 10 years.

Moreover, asset allocators are more inclined to fund future equity purchases by reducing cash holdings, which remain at a positive 3.8 percent. The March survey found 28 percent would use cash in this way, versus February’s 22 percent. The majority, though, are more inclined to lighten government bond holdings to facilitate fresh buying of equities.

Sectoral shift supports banks
Investors are more positive on Banks than at any time since December 2006, the survey reveals. A net 14 percent have moved to an overweight position this month – up eight percentage points month-on-month.

They are funding this move by lowering positions in Materials stocks (a China proxy affected by lower conviction evident elsewhere in the survey), where a net 17 percent are now underweight. In addition, they have reduced exposure in Telecoms to a net 28 percent underweight. This represents the lowest level of appetite for this sector in more than seven years.

Renewed appetite for Technology exposure is also evident in the panel’s responses. Overweights in the sector have climbed to a net 35 percent, reversing a pattern of declining exposure over the past year.

Fund Manager Survey
An overall total of 254 panelists with US$691 billion of assets under management participated in the survey from 8 March to 14 March. A total of 198 managers, managing US$578 billion, participated in the global survey. A total of 124 managers, managing US$241 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Big hedge funds win again on PetSmart, Riverbed, RBS sells real estate loans to hedge fund Cerberus, Talisman energy speculation: Which hedge funds could benefit?[more]

    Big hedge funds win again on PetSmart, Riverbed From CNBC.com: Another week, another set of wins for activist investors. On Sunday, pet supply retailer PetSmart agreed to the largest leveraged buyout of the year at $8.7 billion. Hedge fund firm JANA Partners had been pushing for a sale a

  2. Outlook - Hedge fund manager who remembers 1998 rout says prepare for pain, Bond guru Bill Gross predicts U.S. economic growth to dip to 2%[more]

    Hedge fund manager who remembers 1998 rout says prepare for pain From Bloomberg.com: Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia. He was soon working around the clock when investors began targeting the region’s

  3. Investing - Hedge funds get boost from healthcare in 2014, Paulson & Co takes stake in Salix on heels of inventory issues[more]

    Hedge funds get boost from healthcare in 2014 From Valuewalk.com: The healthcare sector started the year on a turbulent note, as stocks of many major biotechnology companies were battered. However, most of the players in this sector have bounced back. The BarclayHedge Healthcare & Biotec

  4. Opalesque Exclusive: U.S. legal receivables fund launched in August[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Investing in asset-backed receivables is a strategy that has been an integral part of the alternative investment space within the overall fixed income asset c

  5. Comment - High fees and low performance hit hedge funds[more]

    From FT.com: Disenchantment over high fees and lackluster performance may finally be turning the tide against hedge funds, fresh data suggest. Despite generally weak returns since the global financial crisis, hedge funds have enjoyed positive net inflows every year since 2010. This helped assets und