“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.