Fund managers are more positive for global growth and have started to invest more in capital markets with the US and emerging economies picking up the largest flows.
A regular Bank of America Merrill Lynch (BoAML) survey of investors shows that the amount held in cash by fund managers fell from a 15-year high of 5.8% in July, to 5.4% in August.
A low and stable interest rate environment is a “big factor driving fresh optimism” and there is a preference among fund managers for deflation assets over inflation assets, said BoAML, though a record 48% of investors think global fiscal policy is currently too restrictive.
Allocation to Eurozone equities remains low at a net 1% overweight, with investors seeing EU disintegration as the biggest investment risk.
Allocation to UK equities remains underweight, though less than last month, moving from a net 27% underweight to a net 21% underweight.
Allocation to emerging market equities has improved to a net 13% overweight – its highest level since September 2014.
Allocation to US equities is at its highest since January 2015, at a net 11% overweight.
“Investors are less bearish, but sentiment has yet to shift from ‘fear’ to ‘greed’. As such, we expect stock prices to rise further until bonds throw another tantrum,” said Michael Hartnett, chief investment strategist at BoAML.
The survey of global investors had 181 respondents, including portfolio managers and chief investment officers.
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