Fund managers located worldwide find US equity earnings to be the best quality earnings and plan to become more weighted in this asset class, according to a monthly Merrill Lynch survey released today.
By questioning 269 fund managers globally between July 6 and 12, the survey found that 54% of fund managers, compared to 46% last month, said they see corporate profits heading higher, especially in America.
The survey also found that these investors are unambiguously bullish on equities worldwide, despite current weakness in markets. A portion of the survey, the Merrill Lynch Buy-side indicator shows that 90% of fund managers believe that world equity markets will be unchanged or higher in a year’s time. Of these, 20% said that world markets would be “much higher” than current levels.
“Despite a deteriorating global economy - particularly in Europe and Japan - two thirds of the fund managers polled this month are still convinced that the global economy will get stronger in the next 12 months,” said David Bowers, Merrill Lynch chief global investment strategist.
Half of the fund managers polled are adamant that Japan has the least attractive outlook for corporate profits, compared to 45% last month.
One of the biggest changes in fund manager opinion this month is inflation. Only 22% of institutional investors said that core inflation would be higher in a year’s time, which is down from 38% in June.
Fund managers were also deeply divided as to which investment style they think will be most successful, Bowers said. This month, 45% of fund managers said they would be leaning toward ‘value’ investing, while 39% said they wanted to invest in ‘growth’ funds. Last month, the figures were 42% versus 46% respectively.
When asked what global sectors they would overweight or underweight, fund managers told Merrill Lynch that they preferred general industrials, followed by basic industries. The least preferred sector by fund managers was telecommunications and utilities.
By Janet Du Chenne
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