US assets are back in vogue
Investors are seeking safety in US assets as the economic downturn spreads to Europe, research revealed yesterday.
A majority, 53 per cent of fund managers, expect the dollar to appreciate and 38 per cent plan to overweight US equities during the next 12 months, according to Merrill Lynch’s monthly fund manager survey. Both readings are record highs.
The recent fall in oil prices has also led European investors to sell oil producers and buy into consumer stocks, according to the survey.
European asset managers net overweight position in the oil and gas sector has fallen sharply, from 62 per cent in June to 11 per cent in August. At the same time, the net underweight in banks has shrunk from 62 per cent in June to 40 per cent.
Fund managers’ fears of inflation have also reached their lowest level since 2001, with 18 per cent of respondents now expecting global inflation to fall in the next 12 months.
A global recession is however widely expected by fund managers with almost one quarter of the 193 fund managers questioned by Merrill saying the global economy was already in recession and almost half expecting the world economy to contract during the next 12 months.
This compares to just 16 per cent in June.
“The market appears to have overreacted to a fall in the oil price, and investors have turned a blind eye to second round effects of inflation, such as rising wages,” said Karen Olney, chief European equities strategist at Merrill Lynch.
She said it would take “several months” of slowing global growth to to be sure that the “inflationary dragon” had been slain.