The research found around 17% of global fund managers believe municipal funding is the biggest risk to markets, around 2% more than those whose biggest fears centred on European sovereign debt. An even bigger fear for fund managers, with over 30% of the vote, was the risk of premature fiscal tightening by governments.
However, BofA said what was even more telling in this month’s survey was the number of extra ‘risks’ added by managers under the survey’s miscellaneous section. These additional fears ranged from concerns around protectionism, debt inflation, Chinese inflation/deflation to fears over an outbreak of war in the Middle East or unconsidered Black Swan event.
Swing in sentiment
The research also revealed a swing in sentiment towards the UK, with asset allocators the most positive on the region for the first time since May 2007. While this is still a positive for the UK, in total the average manager remained underweight, albeit at only 2% although this is down from an average underweight of 15% in July.
Conversely, US equities, having been seen as a relative safe haven during the peak of the European sovereign debt crisis, have fallen out of favour with asset allocators, with 14% saying they are currently underweight – double the amount underweight in July and a long way off the peak of 22% overweight three months ago.
Pessimism on Japan has also returned, with a net 27% of allocators now underweight up from 11% underweight in July, making it the least favoured region dubious a title previously belonging to the UK.