Bearish sentiment about the outlook for the global economy and corporate earnings has eased, according to a Bank of America Merrill Lynch Survey of Fund Managers conducted in early August.
In addition, a key indicator tracking risk and liquidity conditions returned to an almost neutral reading, indicating an improvement in sentiment, according to Merrill Lynch.
The survey also revealed a sharp drop in investors’ appetite for U.S. and Japanese equities, but a recovery in demand for Eurozone equities.
“The spotlight of investor pessimism has shifted away from China and Europe to Japan and the U.S. Investors clearly remain cautious, so better news on U.S. growth and fiscal policy would be a pleasant surprise,” said Michael Hartnett, chief global-equities strategist at BofA Merrill Lynch Global Research in a press release.
The survey of more than 150 fund managers found that 5% believe the global economy may improve next year, which is lower than the 12% percent predicting the world economy would deteriorate in July.
The percent expecting below-trend growth and inflation remains unchanged at 73% in August. Still, 78% of respondents think a double-dip recession is unlikely.
In addition, 55% believe there probably won’t be any interest-rate hike in the United States before the third quarter of 2011.
“Investor sentiment on Europe has staged a remarkable recovery in the past few months, underpinned by greater optimism about Europe’s banks. Economic data now has to continue to support this shift,” said Gary Baker, head of European-equities strategy at BofA Merrill Lynch Global Research in a statement.