The latest global fund manager survey by Bank of America Merrill Lynch indicates that investors have a lower risk appetite compared to last month.
Global investors are turning away from higher risk exposures this month, according to Bank of America Merrill Lynch's May fund manager survey.
The number of investors in the overweight camp for equities was down 7 percentage points from last month, according to the survey, after the recent “aggressive” sell-off in bond markets.
Conservative investment attitudes were most prominent in the US with expectations for the Federal Reserve's rate hike now pushed towards the end of the year. In stark contrast to the overweight positions recorded over the first quarter of the year, appetite for US stocks shrunk to a net 19 per cent underweight this month. A net 39 per cent plan to underweight the region over the next year.
There was little confidence in the US's corporate profitability – only 7 per cent of investors picked the US as the region with the brightest earnings outlook.
On a macroeconomic level, a significant 70 per cent of investors expect both growth and inflation to remain below historical trends over the next year. The dubious outlook is reflected in the sharp rise in overweight cash positions to a net 23 per cent. Still, a net 59 per cent expect the global economy to strengthen this year.
“There is no loss of faith in economic recovery, and positioning still assumes that the US dollar goes up, but doubts are creeping in – hence this jump in allocation to cash,” said chief investment strategist at BofA Merrill Lynch Global Research, Michael Hartnett.
Investors painted a more encouraging picture for Europe and Japan, two economies that continue to be fueled by quantitative easing. A respective net 49 and 42 per cent of fund managers are overweight Europe and Japan.
Europe remained the most popular investment destination, with a third of fund managers picking it as the top market to overweight over the coming year.
The UK's decisive election outcome, which followed months of uncertainty and inconclusive polls, saw optimism in the nation jump notably. Investors halved their equity underweights from last month, and the net 3 per cent of European fund managers planning to overweight the UK in the coming year was in contrast to the net 50 per cent who said they would underweight it last month.
A total of 208 panelists with $607 billion of assets under management took part in the survey from May 8-14.