Investor optimism over the global economic recovery and corporate profits has been dented, though sentiment toward Europe has improved.
The Bank of America Merrill Lynch Fund Manager Survey finds that 71% expect the economic growth to remain “below trend” in the coming 12 months, up from 61% a month ago.
Expectations for a recovery in corporate profits have also fallen. Just 28% expect corporate profits worldwide to improve in the next 12 months, down from 41% last month.
Europe has been able to avoid the downward shift in global sentiment with equity allocations reaching a six-year high.
“Strong flows into Europe would call for a touch of near-term caution, but solid macro momentum in the region suggests that any dips in EU equity markets would be enthusiastically bought,” says John Bilton, European investment strategist with Bank of America Merrill Lynch.
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