BofA Merrill Lynch survey shows 35 percent of investors fear fiscal cliff most, while 33 percent see eurozone debt crisis as top concern
The US `fiscal cliff’ has surpassed the EU sovereign debt crisis as the main concern of global fund managers amid the approaching US presidential election, according to the September fund manager survey from Bank of America Merrill Lynch.
The fiscal cliff facing the US is the main concern of 35 percent of global investors, compared with the 33 percent of global investors who cite the eurozone crisis as the biggest `tail risk’ to the global economy, according to the survey.
`Investors now view the US fiscal cliff as a greater threat than the eurozone – and the upcoming election is putting these fears into sharper focus,’ says Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, in a release.
A net 1 percent of asset allocators worldwide are now `overweight’ eurozone equities, marking the first net overweight position since the eurozone crisis intensified in February of last year, the survey shows.
The position has improved sharply since August, which saw a net `underweight’ position of 12 percent. The percentage of investors who say the eurozone is the region they most want to overweight in the coming 12 months climbed to nine percent in September from 5 percent in August.
Investors in Europe are now evenly divided on whether the continent’s economy will strengthen or weaken over the next 12 months, an improvement over August, when 23 percent said they expected the economy to worsen. European investors have also increased allocations in 12 out of 19 sectors on the continent, according to the survey.
`We have seen a 25 percent rally in European stocks from the June low, but sentiment on Europe has only just turned positive,’ says John Bilton, European investment strategist at BofA Merrill Lynch Global Research, in the release.
`Any extension of the rally is likely to be led by sector rotation and buying of unloved, domestically exposed stocks.’
The percentage of asset allocators worldwide who are overweight US equities, meanwhile, fell in the September survey to a net 11 percent from a net 13 percent in August.
A net 58 percent now view US equities as the most overvalued in the world currently, while a net 43 percent see eurozone equities as the most undervalued. `This represents the greatest divergence between European and US valuations in the history of the survey,’ according to the release.
The survey respondents also believe the global economy will improve over the next 12 months although corporate profits will decline.
A net 17 percent expect the global economy to improve while a net 28 percent expected corporate profits to drop. A net 59 percent say companies are investing too little while a net 41 percent say companies should increase capital spending.
The global fund manager survey was conducted between September 7-September 13 and included 253 panelists with $681 bn of assets under management.
