Over two-thirds of investors think corporate profits will not improve over the next 12 months.
The Bank of America Merrill Lynch (BoAML) August fund manager survey found only 33% of investors thought corporate profits would improve – the lowest level since November 2015.
Average cash balances remained steady at 4.9% globally, still above the past ten-year average of 4.5%; European investors’ cash weightings rose to an average of 5.3%, the highest reading since March 2003.
Nearly half of respondents – a record high – said equity markets were overvalued.
For the second month in a row, fund managers cited the top two biggest tail risks as a policy mistake by the Federal Reserve or European Central Bank, and a crash in global bond markets.
Michael Hartnett, chief investment strategist at BoAML, said: “Investors’ expectations for corporate profits have taken an ominous turn this year, which is a warning sign for equities over bonds, high yield over investment grade, and cyclical sectors over defensive ones. Further deterioration is likely to cause risk-off trades.”
BofAML surveyed 202 fund managers with $587 billion (€499.6 billion) of assets under management.
©2017 funds europe
