Fund managers most bearish on global outlook since 2008 - survey

Fund managers are as pessimistic about the world economy as they were ten years ago, when the financial crisis devastated global markets.

According to the Bank of America Merrill Lynch Fund Manager Survey for October, net 38% of respondents expect the global economy to decelerate next year, the worst outlook on global growth since November 2008.

A net 20% of investors thought global profits would decline over the next 12 months, a two-year low, while a number argued that the dollar was overvalued.

Average cash balances held steady at 5.1%, well above the 10-year average of 4.5% and the highest for 18 months. Investors tend to invest in cash funds at times of uncertainty.

Markets around the world have enduring a turbulent autumn, as investors face down a range of risks, including the increasingly strained relationship between the US and China, interest rate rises, the unwinding of quantative easing and Brexit. The IMF recently downgraded its prediction for global growth after the US imposed trade tariffs on China.

Of those polled, 35% said a trade war was the biggest risk, followed by quantative tightening and a potential economic slowdown in China.

Yet despite the bearish outlook, allocation to global equities held steady at 22% overweight; allocation to bonds slipped 5 percentage points to net 50% underweight.

Noted Michael Hartnett, chief investment strategist: “Investors are bearish on global growth, but not bearish enough to signal anything but a short-term bounce in risk assets.”

The BofAML benchmark survey was conducted between 5 and 11 October, and 231 investment managers with $646bn assets under management responded.