Fund Managers Increasingly Pessimistic on Both Sides of the Atlantic

Investor pessimism continues to grow on both sides of the Atlantic Ocean, according to Merrill Lynch's survey of fund managers for October.

Results from the latest survey show that 69% of respondents believe that the global economy has entered recession. That's up sharply from 44% one month ago. 

Fund managers also weighed in negatively on monetary policy, with a record 59% of those surveyed saying it is too restrictive at the moment.              
The survey also revealed that 49% of respondents are overweight cash despite a growing belief from 43% of respondents that equities are currently undervalued.

“Fund managers are waiting for the triggers that will give them the confidence to buy,” said Gary Baker, head of Europe, the Middle East and Africa (EMEA) equity strategy at Merrill Lynch.  “What they are looking for is a loosening of monetary conditions and for third quarter earnings to clarify where problems and opportunities lie across equity markets.”

Merrill Lynch said that a total of 172 fund managers participated in the global survey from Oct 3 to Oct 9, managing a total of US$531-billion.  A total of 150 managers participated in the regional surveys, managing US$335-billion. 

The pessimistic outlook is particularly evident in Europe, which has become the world's least popular equity investment destination.  41% of global asset allocators are underweight euro zone equities, according to the survey, while 90% of European respondents expect economic conditions to worsen.  74% of those surveyed believe recession is inevitable and 97% believe corporate earnings will be weaker in the twelve months ahead.

Karen Olney, lead European equities strategist at Merrill Lynch said European investors have been moving out of the Industrial Goods & Services sector over the past month but remain overweight in Telecoms and Healthcare.

The Merrill Lynch survey also found that U.S. fund managers are now much closer to fully accepting what they expect will be a deep and prolonged U.S. recession.  

Comments

[hy is the s...:]

This is terrible for seniors' who draw on their pension funds for their income. They cannot count on the possibility of a long term recovery , since for them, there is simply no long term left.

2008 Oct 17 05:01 PM