Fund Managers See 3 or More Rate Hikes Over Next 12-Months - BofA Merrill Lynch Survey

A majority (58 percent) of global investors expect the U.S. Federal Reserve (Fed) to raise rates three times or more in the coming 12 months, according to the BofA Merrill Lynch Fund Manager Survey for December.

• More than half of the panel (53 percent) says long U.S. dollar is the “most crowded trade,” up from 32 percent in November.
• Thirty-five percent say the end of the Fed hiking cycle is the event most likely to end the U.S. dollar bull market.
• Risk-taking fell. Cash rose to 5.2 percent of portfolios from 4.9 percent last month.
• A net 43 percent of regional fund managers expect China’s economy to weaken in 2016, up from a net 4 percent last month.
• Weighted average GDP growth projections for China in 2018 have fallen to 5.5 percent from November’s 5.9 percent.
• A net 29 percent of asset allocators are underweight commodities, up from a net 23 percent in November.
• As investors increase U.S. equities underweights, Europe and Japan are most favored regions for overweights in 2016.
• Investors emphasized a focus on quality, with a net 65 percent saying that high-quality earnings stocks will outperform low-quality earnings stocks in 2016.

“The strong dollar view is writ large across all asset, regional and sector allocations. It will take a very dovish Fed and weak U.S. earnings to reverse the strong dollar view in 2016,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

“European equities remain in favor despite disappointment over the ECB decision,” said James Barty, head of European equity strategy.

An overall total of 215 panelists with US$620 billion of assets under management participated in the survey from 4 December to 10 December 2015. A total of 175 managers, managing US$517 billion, participated in the global survey. A total of 106 managers, managing US$241 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global 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.

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