19/02/2009
World - Hope is returning to financial markets, according to latest Merrill Lynch survey
Though the gravity of the financial crisis has never been so manifest, a return of optimism about outlooks for growth in China has contributed to a significant improvement in investor sentiment, according to the most recent Merrill Lynch survey of managers (February).For the first time since the crisis began in July 2007, the number of investors predicting that the crisis will become more severe in the next twelve months has declined to a net total of 6%, compared with 24% in January and 60% in October. However, 90% of investors do admit that we are now in a global recession. Growth outlooks for the Euro zone, for their part, have reached their highest levels for twelve months, but European managers remain overweight in cash, where positions are at their highest levels since October 2001.There has also been a favourable development in investors’ predictions of corporate profits: only 43% of respondents predict that profits will deteriorate in the next twelve months, compared with 63% in December. In terms of allocation, commodities are regaining strength, with a net position 15% underweight, compared with 32% in December. Merrill Lynch emphasizes that gold is not considered overvalued. The regain of optimism does not extend to equities (34% net underweight, as in December). Investors are returning to cyclical shares to the expense of defensive shares.