“Managers are positioned for a strong profit recovery in Europe, and the upcoming earnings season is key to maintaining this stance; given the high sentiment, any earnings disappointment will likely be punished by investors,” said John Bilton, European investment strategist.Demand for capex reach to record highs Investors increasingly believe companies should be using their rising profits to grow their businesses – a net 67 percent believe companies are under-investing, a record high reading in the history of the survey. And when asked what companies should do with excess cash, 58 percent favored capex, while only 11 percent want cash preservation. Global Emerging Markets remain a drag but stars align for Europe Against the broader global background of rising optimism from growth and profits, Global Emerging Markets remain out of favor. A net 61 percent expect a sharp deterioration in profits in GEM equities, up from net 32 percent expecting the same in December. Furthermore, investors believe the biggest “tail risk” to the global outlook is a China hard landing and commodity collapse – some 37 percent of investors take this view, compared with the 14 percent given to each of the EU sovereign/banking crisis and a geopolitical crisis. As for Europe, a net 22 percent believe equities in the region are under-valued up from net 15 percent expecting the same last month. On a 12-month view, when asked which equities they would most like to overweight, investors picked Europe with a net 34 percent, the second-highest reading in the history of the survey. Likewise, for the same timeframe, only Japan scored a positive with a net 12 percent would like to overweight, while a net 13 percent and a net 28 percent expect to underweight U.S. and GEM equities respectively. Risk-taking near historic high Risk-taking by investors is near historic highs. A net 4 percent of investors say they are taking higher-than-normal risks. That’s up from a net zero percent in December and a net -4 in November. Since the start of this survey this figure has been solidly positive on only three previous occasions.
This appetite for risk is also reflected in investors’ preferred sectors – Tech, Industrials and Banks top their overweight lists while Utilities, Staples and Telecoms languish in underweight territory.Fund Manager SurveyAn overall total of 234 panelists with US$653 billion of assets under management participated in the survey from 10 January to 16 January 2014. A total of 185 managers, managing US$524 billion, participated in the global survey. A total of 115 managers, managing US$248 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world. BofA Merrill Lynch Global ResearchThe BofA Merrill Lynch Global Research franchise covers more than 3,500 stocks and 1,150 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2013 by Institutional Investor magazine; No. 1 in the 2013 Institutional Investor All-Asia survey for the third consecutive year; No. 1 in the Institutional Investor 2013 Emerging Market & Fixed Income Survey; No. 2 in the 2013 Institutional Investor All-America survey; No. 2 in the All-Japan survey for the second consecutive year; No. 2 in the 2013 All-Latin America survey; No. 2 in the 2013 All-China survey; and No. 3 in the 2013 Institutional Investor All-Europe survey. The group was also named No. 2 in the 2013 Institutional Investor All-America Fixed Income survey for the second consecutive year; and No. 3 in the 2013 All-Europe Fixed Income Research survey. Bank of AmericaBank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 50 million consumer and small business relationships with approximately 5,100 retail banking offices and approximately 16,300 ATMs and award-winning online banking with 30 million active users and more than 14 million mobile users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
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