Investor Confidence in Corporate Profits Evaporates
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According to a BofA Merrill Lynch fund manager survey released today, investor confidence weakened further in July. The Growth Expectation Composite fell to 37 in July from 43 in June and 54 in May. The belief that corporates can grow profits by 10 percent or more is at its lowest point since April 2009.
"July's survey highlights that corporate profit expectations have to catch up with the downgrade in the economic outlook we have seen the past two months," said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.
Regarding Europe, investors' perception of risk in the eurozone has shifted this month with fears falling about the periphery but rising about Europe’s core. European investors see an increasing risk of recession and also concur with rising worldwide concerns about corporate profits.
Technology has been a favorite sector for global investors for the past three years, but according to today's report, U.S. investors have signaled a possible bursting of the IT bubble. Overall, a net 22 percent of U.S. respondents to the Regional Survey are overweight technology - a sharp fall from a net 41 percent a month ago. Within those figures, 19 percent of the panel are underweight IT, up from 9 percent in June.
U.S. equities have declined in popularity as global asset allocators have cast their net around the world. A net 14 percent of respondents are overweight U.S. equities, down from a net 31 percent last month. At the same time, asset allocators have reduced their underweights in eurozone, U.K. and Japanese equities.
Despite commodities as an asset class losing popularity this month, investors see gold as fairly valued and oil as undervalued.
An overall total of 261 panelists with US$708 billion of assets under management participated in the survey from 6 July to 12 July. A total of 190 managers, managing US$567 billion, participated in the global survey. A total of 145 managers, managing US$323 billion, participated in the regional surveys.
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"July's survey highlights that corporate profit expectations have to catch up with the downgrade in the economic outlook we have seen the past two months," said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.
Regarding Europe, investors' perception of risk in the eurozone has shifted this month with fears falling about the periphery but rising about Europe’s core. European investors see an increasing risk of recession and also concur with rising worldwide concerns about corporate profits.
Technology has been a favorite sector for global investors for the past three years, but according to today's report, U.S. investors have signaled a possible bursting of the IT bubble. Overall, a net 22 percent of U.S. respondents to the Regional Survey are overweight technology - a sharp fall from a net 41 percent a month ago. Within those figures, 19 percent of the panel are underweight IT, up from 9 percent in June.
U.S. equities have declined in popularity as global asset allocators have cast their net around the world. A net 14 percent of respondents are overweight U.S. equities, down from a net 31 percent last month. At the same time, asset allocators have reduced their underweights in eurozone, U.K. and Japanese equities.
Despite commodities as an asset class losing popularity this month, investors see gold as fairly valued and oil as undervalued.
An overall total of 261 panelists with US$708 billion of assets under management participated in the survey from 6 July to 12 July. A total of 190 managers, managing US$567 billion, participated in the global survey. A total of 145 managers, managing US$323 billion, participated in the regional surveys.
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