Fund Managers Overweight Global Equities, BoA Finds
January 24, 2011
Global equities are benefiting from an increasingly positive outlook by investors, according to the latest BoA Merrill Lynch Survey of Fund Managers.
Just over half of fund managers, 55%, say they're overweight in global equities, the largest proportion since July 2007. Just last month, only 40% of fund managers said they were overweight in international stocks. The additional assets appear to have come from bonds-54% of fund managers are now underweight in bonds, from 47% in December.
A corresponding proportion of fund managers, 55%, expect the global economy to get stronger this year, and almost three fourths of fund managers expect inflation to rise. These factors create a "potent case for equity investment," noted Gary Baker, head of European equity strategy at BoA Merrill Lynch.
55% of Institutional Mgrs. Foresee Global Growth
A majority of institutional investor, 55%, expect global growth over the next six months, up considerably from the 33% who felt this way in the third quarter, a survey of 97 institutional managers by Northern Trust found.
In addition, 80% expect corporate earnings to rise in the next three months, and 58% think stocks in the S&P 500 Index are undervalues.
As a result of this growth, 62% expect inflation to rise over the next six months, up from 20% who thought so in the third quarter. And 53% expect interest rates to increase in the next three months, up from 20% in the third quarter.
"In the fourth quarter, our managers expressed optimism that global markets are on solid footing and will perhaps continue their upward trajectory," said Chris Vella, global director of research for Northern Trust Global Advisors.
"As we might expect, however, with growth comes the risk of increased inflationary pressure and the potential for rising interest rates," Vella added. "It appears that our managers have also sounded a note of caution around these two important measures."
Fewer institutional managers, however, think that emerging markets are highly attractive, with only 39% thinking emerging markets equities are undervalued, down from 59% who thought so in the third quarter.
"Our managers are continuing to find investment opportunities throughout the U.S. and international markets," said Harry Phinney, an investment analyst with Northern Trust.
BlackRock's Doll Remains Bullish
With stocks up for the seventh consecutive week, Bob Doll, BlackRock chief equity strategist, sees no reason to expect a plunge. Doll expects hiring levels to increase soon, as fourth-quarter earnings beat consensus expectations for the eighth consecutive quarter and corporate debt stays low and profits high.
New hiring, he says, will also boost consumer confidence.
Doll hopes that Congress will focus on "job creation in the short term and on deficit reduction in the long term."
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