Managers expect another US credit downgrade

More than half of global fund managers expect a further downgrade of America’s credit rating before the end of 2013, according to the latest Bank of America Merrill Lynch (BoA ML) global fund manager survey.

A net 53% of asset allocators consider another downgrade before the end of 2013 is possible, while a net 36% think it could happen during 2012.

The survey also confirms that fund managers have been shunning the eurozone in favour of American and emerging market equities. (article continues below)

The proportion of investors with an overweight to American equities rose to 20% from 6% since the October survey, while those with global emerging market equities exposure jumped to 27% from 6%.

Gary Baker, the head of European equities strategy at BoA ML Research, says: “European growth concerns are more intense, but sentiment looks to be close to rock bottom – unless Europe’s problems spread to the rest of the world.” Fears of a global recession eased since October, with 31% of investors expecting the world economy to avoid a recession, up from 25%.

Michael Hartnett, the chief global equities strategist at BoA ML Research, says: “Investors are showing belief in emerging market growth and US resilience, which is key to retaining positive global sentiment.”

A further net 78% of respondents expect a soft landing for the Chinese economy, or that it will grow more than 7% during the year.

Overall, 258 panellists with $665 billion (£423 billion) of assets under management took part in the survey between November 4-10.