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BofA Merrill Lynch Fund Manager Survey Finds Majority of Investors Expect Three or More U.S. Rate Hikes in Coming Year

Consensus Builds That China Growth Will Slow

Tuesday, December 15, 2015 8:30 am EST

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NEW YORK

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"The strong dollar view is writ large across all asset, regional and sector allocations. It will take a very dovish Fed and weak U.S. earnings to reverse the strong dollar view in 2016"

A majority (58 percent) of global investors expect the U.S. Federal Reserve (Fed) to raise rates three times or more in the coming 12 months, according to the BofA Merrill Lynch Fund Manager Survey for December.

  • More than half of the panel (53 percent) says long U.S. dollar is the “most crowded trade,” up from 32 percent in November.
  • Thirty-five percent say the end of the Fed hiking cycle is the event most likely to end the U.S. dollar bull market.
  • Risk-taking fell. Cash rose to 5.2 percent of portfolios from 4.9 percent last month.
  • A net 43 percent of regional fund managers expect China’s economy to weaken in 2016, up from a net 4 percent last month.
  • Weighted average GDP growth projections for China in 2018 have fallen to 5.5 percent from November’s 5.9 percent.
  • A net 29 percent of asset allocators are underweight commodities, up from a net 23 percent in November.
  • As investors increase U.S. equities underweights, Europe and Japan are most favored regions for overweights in 2016.
  • Investors emphasized a focus on quality, with a net 65 percent saying that high-quality earnings stocks will outperform low-quality earnings stocks in 2016.

“The strong dollar view is writ large across all asset, regional and sector allocations. It will take a very dovish Fed and weak U.S. earnings to reverse the strong dollar view in 2016,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

“European equities remain in favor despite disappointment over the ECB decision,” said James Barty, head of European equity strategy.

Fund Manager Survey
An overall total of 215 panelists with US$620 billion of assets under management participated in the survey from 4 December to 10 December 2015. A total of 175 managers, managing US$517 billion, participated in the global survey. A total of 106 managers, managing US$241 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.

BofA Merrill Lynch Global Research
The BofA Merrill Lynch Global Research franchise covers over 3,350 stocks and 1,250 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2015 by Institutional Investor magazine; No. 1 in the 2015 Institutional Investor All-America survey; No. 1 in the 2015 Institutional Investor Latin America survey; No. 1 in the Institutional Investor 2015 Emerging EMEA Survey; No. 1 in the 2015 All-Europe Fixed Income survey; No. 2 in the 2015 Institutional Investor All-Asia survey; and No. 2 in the 2015 All-America Fixed Income survey for the fourth consecutive year.

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