Although asset allocations toward the emerging markets have increased, investors are tempering their optimistic outlook for the global economic recovery according to the Bank of America Merrill Lynch Fund Manager Survey for October. Investors are concerned the global recovery could lose steam even in the face of a better outlook for developing economies. The most recent survey indicates only 54% of market participants believe that global economy conditions will continue to improve. In September, this figure reached as high as 69%. A net 71% expect economic growth to remain “below trend” in the coming 12 months, an increase from a net 61 per cent a month ago. The survey was conducted from October 4 to October 10 — the crucial period when the US economy was going through a “shutdown” that ended on Wednesday.
BofA Merrill Lynch Global Research Chief Investment Strategist Michael Hartnett believes that the recent conflict in Washington caused investors to rethink their allocations, moving back toward benchmark weights. The report further mentioned that investors have put greater allocations towards emerging market equities due to lower valuations in that asset class.