FYI | Dec 22 2008
By Rudi Filapek-Vandyck
Merrill Lynch’s December survey among global fund managers (released last week) generated some interesting statistics that are worth highlighting. Overall, the report very much remains a case of glass half-full/half-empty, depending on the angle an observer takes to digest the fresh insights.
Let’s start with the big number first: 88% of the panel is of the view that the world economy is in recession. Interestingly, from this perspective, is the fact that economist forecasts for 2009 continue to slide. The most bearish indication we picked up during these closing weeks of calendar 2008 was provided by the Institute of International Finance whose forecast is for the world economy to shrink by 0.4% in 2009. This would be the first such drop since at least 1960.
Most economists have started to anticipate negative growth figures for the US, the UK, Japan and Europe next year and a small positive growth number for the global economy as a whole.
The net balance of investors who expect the global economy to worsen in the coming year, according to Merrill Lynch’s survey, now stands at 36%. The good news is this is down from 60% in October. More good news lies in the fact that more than a quarter of respondents believe the global economy will strengthen in 2009. Given the overall view that the next few months will see global economies slide further into negative territory, this would indicate all hope is directed towards the second half of next year.
More good news would be that Merrill Lynch believes there’s now a widespread perception that stocks are cheap, both in absolute terms and relative to bonds. But what to think then of the fact that overall cash levels have risen to an average 5.5%? This is not only up from 5.1% in November, but at the same time the highest level since 2001.
37% of investors believe that fiscal policy is too restrictive, suggesting further stimulus dollars are needed before investors will commit cash. Overall, Merrill Lynch itself draws some very positive conclusions from the survey, starting with the fact that emerging markets might perform better than US equities in 2009 (backed by the fact that equity allocations to emerging markets have fallen to their lowest levels since 2001) and that odds are increasing for a rally into 2009.
We’ll see.
