Four out of five investors believe that the world will continue to experience recession over the coming year. Merrill Lynch’s November Survey of Fund Managers finds that recent policy measures will do little to combat global recession.

Forty percent say they believe that monetary policy is “too restrictive” and asset allocators “remain overweight cash and bonds relative to equities.”

“Investors remain embedded in a defensive asset allocation mindset. Many acknowledge the global policy response seen in recent weeks, but fear of deflation may be keeping them on the sideline,” says Gary Baker, head of EMEA equity strategy at Merrill Lynch. “This could start to look risky as the determination of government fiscal responses allied to further monetary easing starts to play through into sector preferences.”