Global fund managers' confidence in a global economic upturn strengthened in August, but they continued to favour US stocks instead of cyclical plays, according to the Merrill Lynch Global Fund Manager Survey today.
Fund managers' optimism on prospects for the global economy rose in August with 74 per cent of fund managers predicting a stronger economy in 12 month's time, up from 73 per cent in July.
Of those who expect an improvement in the world economy over the next year, 25 per cent see double digit returns from equity. Over half of all fund managers said they were overweight equities and half said they planned to increase weightings of equities in their portfolios.
Underlining this optimism, the survey showed fund managers beginning to move away from defensive stocks. In August the least favoured sectors were food producers and utilities, both classical defensive sectors, while general industrials and technology were favoured by fund managers.
Growth style investors will outperform value investors over the next 12 months, according to the balance of the 268 respondents to the survey.
A balance of 60 per cent of fund managers believe the outlook for corporate profits is strongest in the US and 62 per cent see the quality of US earnings as ahead of the rest of the world. In consequence, 45 per cent of fund managers said they want to be overweight in US stocks over the next 12 months.
Although fund managers' love affair with US stocks continued in August, the dollar's reign as fund managers' favourite currency came to an end after just two months.
In August 57 per cent of fund managers picked the single currency as their top choice against 31 per cent backing the dollar. In July 43 per cent of fund managers favoured the dollar over the euro.