Survey: Global economic outlook remains positive despite decline in investor sentiment
An overall total 265 panelists with $792 billion of assets under management participated in the survey from 8 to 14 July 2011. A total of 196 fund managers, managing a total of $631 billion, responded to the global FMS questionnaire. A total of 149 managers, managing $409 billion, responded to the regional FMS questionnaire.
As per the survey, a net 19 percent of global fund managers and asset allocators believe that the global economy will strengthen in the next 12 months. A net 11 percent of investors predict higher global corporate profits in the coming year, up from a net 7 percent in June.
Nearly two-thirds of the panel identified EU sovereign debt funding as the number one tail risk (64 percent compared with 43 percent in June). A net 22 percent of respondents to the Regional Survey expect Europeâ€™s economy to weaken in the coming 12 months - the most negative reading since April 2009.
A net 57 percent of the European panel is now underweight banks (versus 33 percent in June), leaving the sector at its lowest ebb since February 2009. While respondents to the global survey have scaled back positions in eurozone equities, they have increased them in every other region, including the US.
As sentiment improves, desire for a third round of quantitative easing (QE3) remains low - 40 percent of respondents said in July that they are not expecting QE3. But 48 percent of the panel says that QE3 will be necessary if the S&P 500 falls by 20 percent.
A net 33 percent of asset allocators were overweight Global Emerging Markets equities this month, a rise of 10 percentage points since June.
Among Asian and emerging market portfolio managers, concerns over Chinaâ€™s growth prospects have eased. A net 24 percent of respondents are now predicting slower growth over the next 12 months down from a net 40 percent in June.
Expectations within Japan are also strong, especially regarding corporate performance. A net 76 percent of respondents to the Japanese Regional Survey expect corporate earnings to improve in the next 12 months, up from a net 54 percent in June. A net 56 percent believe that Japanese equities are undervalued.
Asset allocators increased equity allocations and reduced bond holdings. A net 35 percent of asset allocators were overweight equities in July, up from a net 27 percent in June. A net 45 percent of the panel was underweight bonds, up from a net 35 percent in June.
But investors have indicated that liquidity conditions worsened over the past month. A net 20 percent of the panel described liquidity conditions as positive, down from a net 35 percent in July.
Visibility has also deteriorated. A net 35 percent of investors describe their current investment time horizon as shorter than normal - up from a net 26 percent in June and the weakest reading since May 2010.
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