Global investor confidence has risen in March as the outlook for the US dollar and US equities outweighed rising concern over China’s economy, according to the fund manager survey from Bank of America Merrill Lynch (BofAML).
A net 61 percent of fund managers surveyed expect the economy to strengthen worldwide over the next year, an increase from a net 59 percent in the February survey, BofAML says in a press statement. Optimism over the performance of equities is leading the increase, with a net 57 percent saying they are now overweight equities, compared with 51 percent last month.
March also marks the highest level of optimism over the US dollar in the history of the survey, with a net 72 percent of respondents predicting the dollar will strengthen over the coming 12 months, compared with only 42 percent in the February survey.
‘Relative US economic outperformance on the back of the housing market’s ongoing improvement and the energy independence story will lead a secular uptrend in the dollar,’ says Michael Hartnett, chief investment strategist at BofAML Global Research. ‘US equities’ leadership in the ‘Great Rotation’ suggests developed market equities are the likeliest winner in this scenario.’
Investor confidence in Chinese economic performance dipped, with a net 14 percent of regional respondents saying China’s economy will strengthen over the next 12 months, indicating ‘significantly increased’ fears of a hard landing, BofAML says.
The survey also shows that European fund managers are dramatically more confident in their continent’s economy, even as investors from other regions reduce their European holdings on the expectations of economic deterioration. A net 40 percent of European fund managers expect the continent’s economy to strengthen over the next year, up by 8 percent since the start of 2013. At the same time, fund managers from other regions have cut their equity positions, with a net 4 percent saying they are now overweight European equities.
‘A disconnect between European investors’ increasing optimism about the region and global investors’ continued caution over Europe is also apparent in the survey,’ says John Bilton, European investment strategist for BofAML.
The survey of 254 market professionals with a combined total of $691 bn in assets under management was taken between March 8 and March 14, before negotiations between European and Cypriot authorities prompted a freeze on Cypriot bank accounts and the ongoing temporary closure of the banks.
