Investors Shift from Cash to Equities

As investors remain optimistic about a global economic recovery, risk appetite is at its highest point since 2006, according to the latest BofA Merrill Lynch Survey of Fund Managers.

Investors see less chance of a double-dip recession. A net 65% of surveyed fund managers believe a global recession is unlikely in the next 12 months, up from 47% a month earlier. Furthermore, a net 72% of respondents believe the outlook for corporate profits will improve in the next year, up from 68% a month earlier.

The increasing risk appetite is evident in actions of asset allocators. Cash positions are at their lowest level since January 2004, according to the survey. A net 7% of respondents are underweight cash in October, compared to a net 10% overweight last month.

A net 38% of respondents are overweight equities, up from 27% in September. Investors continue to shy away from financial stocks, favoring Technology, Energy, Materials, and Industrials, Merrill Lynch found.

“Equities remain in a sweet spot: fears of a double-dip have receded, while worries about inflation and monetary tightening are not imminent enough to prevent an October surge in risk appetite,” said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research.

BofA Merrill Lynch Global Research and market research company TNS surveyed 229 fund managers, managing a total of $616 billion, from October 2 to October 8.