According to the recent Merrill Lynch Fund Manager Survey, global fund managers are overweight equities by 61%. This is the highest equity exposure since February 2011, just as the Eurozone Crisis and global equity bear market was starting. Merrill Lynch report writes:
Improving investor sentiment on global growth, inflation, equities and risk-taking are all testament to a potential macro normalization in the second half. This could eventually feed into a normalization of rates. If growth does pick up, volatility will rise too,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research.
Global Asset Allocators overweight on Equities rose to highest reading in over three years. The reading of net 61% OW is the second highest reading in the surveys history. Merrill Lynch warned that any summer “melt-up” in stocks, “is likely to be followed by an autumn correction. This aggressive positioning for recovery in H2 reflects a significant increase in investors’ inflation expectations,” the survey said.
I’ve included both the shorter term and the long term charts for viewing pleasure. At the same time, I would like to make a further observation that exposure towards bonds continued to decrease as per the survey. The question now is, with majority of the fund managers overweight equities, are we seeing the start of a stock market correction?
