Fund Manager Survey Shows Global Recession Fears On Rise
Aug 13, 2008 Market Outlook
Fund Manager Survey Shows Global Recession Fears On Rise
Last Update: 8/13/2008 9:03:24 AM
By Sarah Turner
More fund managers now believe that the global economy will enter into recession,
according to Merrill Lynch’s fund manager survey for August.
The survey of 193 asset allocators managing $611 billion in assets found that a
net 3% believe that a global recession is unlikely over the next twelve months,
down from 15% taking this stance a month ago.
Meanwhile, 24% of respondents believe that the global economy is already in a
recession, compared to 20% a month ago.
“The credit crunch may be morphing from a financial crisis into an economic one
as fears grow about the outlook for the global economy,” the survey said.
It added that fears of stagflation are giving way to expectations of below-trend
growth and inflation.
A net 18% of now managers believe that global core inflation will be lower in a
year’s time.
This view contrasts with that of July’s survey which showed that a net 3% of
managers believed that inflation would be higher at the same point next year.
The survey’s release comes amid downbeat economic assessments from around the
globe on Thursday, with Japan’s economy contracting during the second quarter and
the Bank of England warning there may be no growth this year.
The European Central Bank last week acknowledged weakness in the euro-area
economy, prompting a sharp drop for the euro.
U.S. equity overweight at more than 6-year high.
“With the economic slowdown now spreading to regions that had been assumed to be
immune–such as the euro zone–U.S. assets are starting to look relatively
attractive to institutional investors,” the survey noted.
The survey said that the balance of managers overweight U.S. equities is the
highest for more than six years amid a belief that the U.S. dollar is
undervalued.
The number of managers overweight U.S. equities has risen to a net 12%, from 7%
in July.
Expectations for U.S. corporate profits have improved, with a net 18% taking the
view that this region has the most favorable outlook for profits, up from 7% a
month ago.
On the other hand, a net 27% of managers are still underweight European equities,
a slight improvement on July’s reading of 32%.
The profit outlook is least favorable in the euro zone, a net 29% believe,
unchanged from July.
The net number of managers overweight emerging market equities rose to 8%, from
4% in July. A net 31% of managers think that the outlook for corporate profits is
most favorable in global emerging markets, compared to 22% taking this view in
July.
A net 53% of managers expect the U.S. dollar to appreciate the most on a
trade-weighted basis, up from 36% a month ago. A net 59% believe that the euro
will depreciate the most, up from 50% in July.
On overall allocation, a net 17% of managers believe that global equity markets
are undervalued, up from 16% taking this view a month ago, while a net 25%
believe that bond markets are overvalued, up from 33% last month.
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Tags: Asset Allocators, Bank Of England, Core Inflation, Corporate Pr, Credit Crunch, Economic Assessments, Economic Slowdown, Euro Zone, Financial Crisis, Fund Managers, Global Economy, Global Recession, Institutional Investors, Merrill Lynch, Overweight, Recession Fears, Respondents, Sarah Turner, Stagflation, Twelve Months
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