GLOBAL - A Merrill Lynch survey says fund managers are optimistic about the global economy, but want to see European monetary policy eased.
The same institutional investors are keeping an eye on the possibility of a recession in Germany, according to the survey.
More than half of the 268 fund managers surveyed globally said that they are optimistic about the outlook for the global economy. A net balance of 56% said they expect that the global real economy will develop positively over the next 12 months, a number higher than the 40% polled on the same question last month.
Despite the global optimism, fund managers said that European monetary policy needed to be eased, the survey said. A record number, 79%, of the Eurozone fund managers said that the European Central Bank's (ECB) monetary policy is too restrictive. This compares to 69% last month. When asked where the ECB will be in six months, 46% said that it would be 'behind the curve,' according to the survey.
More than 60% of Eurozone fund managers polled said that the probability of Germany falling into a recession is 30% or higher. Almost one in six of those questioned put the probability of a recession at 50% or higher, according to the survey.
Despite the summer doldrums, institutional investors are convinced that the market will move higher, said David Bowers, Merrill Lynch chief global investment strategist, and author of the study. More fund managers than ever say they are passionate about equities and are getting ready to move out of a defensive position.
Asked whether they thought the markets would be higher or lower in 12 months, a net 74% thought they would be higher and are expecting double digit returns.
According to the survey, fund managers see a shift in investment style, with 46% saying growth investing will be the most successful, compared to 39% who think value investing will be best. The majority, 60%, think that large cap stocks will outperform, while 29% prefer small cap stocks.
The Merrill Lynch Fund Manager Survey reflects the views of 268 fund managers worldwide. The survey was conducted between August 3-9 with the help of Taylor Nelson Sofres.
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