Fund Managers Expect Global Recovery

by Philip Morton, Investors Offshore.com

15 June 2001

According to a survey published on Tuesday by Merrill Lynch, fund managers are generally optimistic about the prospects of a global recovery in the forseeable future, but are maintaining a conservative investment stance with many holding risk averse portfolios and overweight in cash.

The Merrill Lynch Fund Manager Survey was conducted between June 1st and June 7th, and covered 212 fund management organisations. Of the 270 fund managers surveyed, 46% said that the global earnings outlook was favourable, compared with just 21% last month. The survey also showed, however, that managers are still cautious about the countries and assets they select, and are tending to favour the US and the dollar over the euro, and Japan. 'There has been a sea change on currencies,' said Merrill Lych's chief global investment strategist, David Bowers. 'Bulls of the euro have thrown in the towel.'

This sea change may have something to do with the recovery potential of US corporate earnings, coupled with the rising inflation figures in France and Germany, two of the key economies of the euro-zone. Fund managers simply see the US as best placed to benefit, with the European Central Bank prevented from making growth enhancing interest rate cuts by a morbid fear of inflation. 35% of those surveyed said that they were positively bullish about US stocks.

Merrill Lynch also found that 79% of investors believed that equities would be the best performing asset class over the next year, with many managers indicating that they were inclined to cut exposure to bonds in favour of stocks.However, despite the overall upbeat nature of the responses, fund managers sounded a note of caution. One third of those surveyed felt that interest rates will be higher next year, and 38% expect higher core global inflation in a years time.

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