Fund managers turn more bullish ahead of Trump inauguration

Fund managers turn more bullish ahead of Trump inauguration

Despite headwinds facing global economy, managers and companies reveal more optimistic outlooks, new studies show reports Rob Langston of FE on 19/01/17.

Fund managers and company management teams became more bullish during January as the outlook for corporate profitability strengthen ahead of Donald Trump’s inauguration, according to new survey findings.

The Bank of America Merrill Lynch monthly survey of fund managers revealed a more bullish outlook for the world economy, with expectations of global growth now at two-year highs as a net 62 per cent now expect growth. It has also been accompanied by an increase in the expectations of higher corporate earnings.

It further revealed that allocations to Eurozone equities by fund managers had risen sharply in January.

Managers moved from a net 1 percent underweight to the sector in December to a net 17 percent overweight position in January.

Manish Kabra, the European equity quantitative strategist at Bank of America Merrill Lynch, said: “Fund managers have returned to Europe amid improvement in the macro outlook, but the UK remains the most underweighted region.”

As well as Eurozone equities, the survey revealed that fund managers were broadly buying technology sector, equities more generally and real estate investment trusts. Sold sectors included industrial stocks, emerging market equities and commodities.

Yet, despite managers turning more bullish than previously, funds have increased allocations to safe-haven cash, which rose to 5.1 percent in January from 4.8 percent above the 10-year average of 4.5 percent.

The Bank of America findings come as Fidelity International also revealed a more bullish stance on corporate earnings from analysts ahead of the inauguration of president-elect Donald Trump.

The populist celebrity-turned-politician is a positive development for corporate balance sheets, having suggested several measures aimed at reducing the tax burden on US companies.

A survey of 146 Fidelity equity and fixed income analysts covering around 17,000 companies revealed more optimism among corporates.

Almost three-quarters of those with a US focus claimed companies they cover believed Trump’s victory would be positive.

Furthermore, 39 per cent with a European focus though the election would be positive for companies in the region.

Two-thirds of analysts covering Asia did not expect any impact to companies on their patch, while a similar number covering Middle East, Africa and Latin America believed it would be negative.

Despite concerns over the impact of Brexit on corporate earnings, no tangible effects have yet been seen while upcoming European elections are also thought to have little overall impact on corporate earnings over the coming months.

Ray Best of UnaVida comments

Currently, the market is on pause, so our advice is to sit on the sidelines for now. In the longer term, we believe the market will continue to rise.before long we see the bull market continuing until October 2017.