The survey, which this month gathered the views of 229 panellists with assets under management of almost $700bn (€530bn), reveals that a net 72% of fund managers expect the world economy to improve over the next year – a sharp increase on July, when just 52% gave the same response.
While investors continue to identify a “Chinese hard-landing and commodity price collapse” as the biggest tail-risk, levels of fear around such an event have declined. Just 32% of survey respondents expect China’s economy to weaken over the next 12 months, compared with two-thirds in July.
Sentiment on the European Union also improved, with a net 88% of BofA ML regional survey participants expecting the bloc to grow in aggregate over the next 12 months – marking the first time in three years that investors have been more bullish on the EU than other global regions.
In line with this view, a net 17% of global fund managers are overweight eurozone equities – the highest allocation to the region’s stock markets since early 2008. However, US equities remain the asset class of choice on a 12-month horizon, with almost a third of respondents overweight.
GEMs out of favour
In contrast, global emerging market stocks remain unloved, and a net 19% of managers are underweight the region. As Expert Investor Europe previously reported, BofA ML views such widespread bearishness as an attractive entry point for contrarian investors.
“While global growth expectations have risen very rapidly, the good news is that cash levels remain high,” Michael Hartnett, chief investment strategist at BofA ML Global Research wrote this month. “Out-of-favor emerging markets offer some enticing opportunities to deploy these balances.”