Institutional investors say they’ve lost all faith in a global recovery and their expectations for growth, profits, and prices have diminished, according to a Merrill Lynch fund manager survey conducted August1 through August 8. The monthly survey included 292 institutional investors, who manage more than $706 billion in funds worldwide.
In July, many managers said they were hopeful a recovery could deliver 10% growth in global earnings per share (EPS), but by August they were less optimistic, saying 2002 global EPS growth was more likely to be around 7%.
“Institutional managers are closing their cyclical positions,” says David Bowers, Merrill Lynch’s chief global investment strategist and author of the study, in a company press release. “They’ve lost confidence in the recovery and now see cost-cutting as the prime driver for earnings growth. But they are still hoping that we are close to a bottom for equity markets, and continue to see value in world stocks.”
In addition, fund managers are becoming more conservative, saying they have become reluctant to “buy on the dips,” according to the survey. Should the overall market fall 10% in the next three months, only 69% would buy stocks, compared to 79% last month.