Merrill Lynch Fund Manager Survey Finds Soaring Optimism

Fund manager optimism about the global economy is at its highest level in nearly six years, according to the Merrill Lynch Survey of Fund Managers for August.

Portfolio managers are putting their cash back into equity markets, and a net 75% of survey respondents believe the world economy will strengthen in the next year. That’s the highest reading since November 2003 and up from 63% in July, according to the survey results.

A net 70% of the survey respondents expect global corporate profits to rise in the coming year (compared to 51% last month).

The optimism is being put to action, with cash balances falling and equity allocations rising. Average cash balances have fallen to 3.5% from 4.7% in July, their lowest level since July 2007, according to Merrill Lynch. A net 34% of respondents are overweight equities, rocketing from a net 7% in July.

Merrill Lynch points to global emerging markets, led by China, and technology stocks as the strongest engines behind the recovery. Investors would rather be overweight emerging markets than any other region (a net 33%). However, that shows a drop from July, when 48% of the respondents most wanted to be overweight in emerging markets.

As far as sectors go, technology is in the lead, with 28% of the surveyed global fund managers overweight the industry. Industrials, Materials, and Banks lag with global fund managers holding 11%, 12%, and 10% overweight positions, respectively.

A total of 204 fund managers, managing a total of US$554 billion, participated in the global survey from August 7 to 12 August. The survey was conducted by Banc of America Securities – Merrill Lynch Research with the help of market research company TNS.