US debt crisis hits global confidence

Confidence surrounding global economic recovery has faltered significantly in the past month since the onset of the US debt crisis.

The latest edition of the monthly fund manager survey, conducted by Bank of America/ Merrill Lynch, shows that a net 54% of investors still believe the global economy will continue to strengthen; but that figure is down from 69% in September. That said, the 54% reading still ranks as historically strong.

According to the October survey, a net 71% of investors expect growth to remain “below trend” over the course of the next 12 months. This reading is up from 61% in September’s survey. The number one concern among global investors is US fiscal tightening policy; 24% thinking this way, as opposed to just 6% in September.

October also saw a dip in investor expectations regarding a recovery in corporate profit levels. While in September, a net 41% said they expected corporate profits to improve in the next year, only 28% felt the same this month. Furthermore, a net 18% of investors feel profit margins will decline in the coming year, up from a net 11% reading in September.

However, US investors remain upbeat about Europe and Japan. A net 46% of asset allocators are overweight European equities, up from a net 36% in September.