Overall sentiment is improving: “A net 20 percent of investors now believe the global economy will strengthen in the coming 12 months – a rise of three percentage points month on month”, says the statement, also less concerned about the outlook for corporate profits – a net 11% expecting a fall in profits in the coming year, down from a net 28 percent in September. “However, expectations of a sharp bounce in earnings fell back with a net 58 percent saying double digit earnings gains are unlikely in the next year, up from 55 percent in September”, the statement added.
Equity allocations rose significantly month-on-month. A net 24 percent of asset allocators are overweight equities, up from a net 15 percent in September. Fund managers increased allocations to seven of the 11 global sectors, including banks and industrials. Allocations to the eurozone and global emerging markets increased, but allocations to Japan fell to a three-year low.
“While the U.S. fiscal cliff is a hurdle, growing belief in the global economy could spur a more ‘risk on’ stance from investors,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“The outlook for European equities is improving, eurozone fears are receding and appear largely priced into equity risk premia; core government bonds offer negative real yields so the impetus to rotate into stocks in Europe, as the outlook stabilizes, is profound,” said John Bilton, European investment strategist at BofA Merrill Lynch Global Research.