Eurozone equity allocations have increased slightly and emerging market investments have fallen over the past month, while fund manager expectations for inflation have “soared”.
The net 8% overweight to Eurozone equities is a “slight” improvement on the 5% of the previous month and represents a five-month high for the asset class, said Bank of America Merrill Lynch in its monthly fund manager survey.
But the allocation to emerging markets has dropped substantially from 31% overweight to 4% overweight.
Manish Kabra, European equity quantitative strategist at the bank, said: “Europe seems placed for contrarians, with Eurozone allocations at below-average levels.”
Kabra added that global investors’ equity allocations towards the UK are at their second lowest level since 2008, with the sterling “considered the most undervalued in the history of our long-running survey”.
The bank also said that fund manager cash levels – which recently had increased to 2001 levels due to a bearish outlook – “slumped” from 5.8% in October to 5% in November, as “global growth and profit expectations rise to one-year highs and the US election result is seen an unambiguously positive for nominal GDP”.
However, stagflation expectations were also close to four-year highs as 22% of investors expected below-trend growth and above-trend inflation over the next 12 months.
There were 177 of the bank’s clients that took part in the survey.
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