Tue, Jan 17, 2017
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. Southpoint Capital gains 3.8% in Q3, bringing year-to-date returns to 5.2%[more]

    From Valuewalk.com: Southpoint Capital Advisors, the $3 billion New York hedge fund founded by former employees of David Einhorn’s Greenlight Capital, added 3.8% net during the third quarter of 2016, bringing year-to-date returns to 5.2% and cumulative returns since inception (July 2004) of 237.4% a

  2. The Big Picture: The case for emerging market debt in 2017[more]

    Benedicte Gravrand, Opalesque Geneva: Emerging market (EM) assets outperformed in 2016 mainly because of stronger fundamentals and an improving international environment, with GDP picking up speed, leading to positive earnings revisions for the first time in five years,

  3. Hedge funds gain across strategies in December, outperform MSCI to close at record index level in 2016[more]

    Komfie Manalo, Opalesque Asia: Hedge funds posted gains across all strategies in December to conclude 2016, with the HFRI Fund Weighted Composite Index (FWC) rising to a record index value level as oil prices surged, equities gained and U.S. interest rates increased into year end, accordin

  4. Performance - BlackRock's robot stock-pickers post record losses, Soros-backed fund Glen Point loses in first trading year, Regal Funds Management: Bleak year as returns in key funds plunge 25pc, Elm Ridge Capital up 25% in 2016[more]

    BlackRock's robot stock-pickers post record losses From Bloomberg.com: Like so many fund titans these days, Laurence D. Fink is betting on machines to turn around BlackRock Inc.'s beleaguered stock-picking business. Trouble is, they just might have made things worse. BlackRock

  5. Eurekahedge Hedge Fund Index up 1.01% in December (+4.48% YTD)[more]

    Hedge funds gained 1.01% during the month of December, with 2016 returns coming in at 4.48%. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) gained 2.38% in December with its 2016 returns coming in at 7.37%. North American equity markets traded higher in December as t