Despite this rather worrying forecast, fund managers said they are less worried about sovereign risk than a month ago, with 61% stating this as their top concern compared with 68% in September. Investors are also less pessimistic about global growth – those predicting a global recession in the next 12 months fell from 40% to 25%.
The research also revealed a change in sentiment towards Europe. Last month, the world was shunning Europe as an investment destination, but this negativity has eased, with only 7% of respondents now saying that Europe is the region they would most like to underweight in the coming 12 months, down from 40% in September. In fact, more investors (8%) said they would like to underweight Japan in the coming year.
Currently, 29% of asset allocators are currently underweight eurozone equities, down from 38% in September. Sentiment towards the UK has also improved – while 26% were underweight U.K. equities a month ago, that figure fell to a net 12 percent in October.
“Europe appears back from the brink. But it seems investors are waiting for the all clear from both Europe and emerging markets before committing cash,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Research.