Investors regained risk appetite in May, reducing cash and buying stocks for the second consecutive month, while inflation overtook slowing growth as their biggest fear, a survey showed on Wednesday, Reuters reports.
The report by investment bank Merrill Lynch also found more fund managers thought the euro was overvalued, while the dollar was considered cheap and gold and oil too expensive.
The monthly poll of 191 fund managers managing a total of $615 billion in assets showed the average cash balance fell to 4.1% in May from 4.2%. Thirty% of managers were overweight equities, up from 28% in April.
Those who thought the global economy will experience recession over the next twelve months fell to 28% of the respondents this month from 40% a month ago.
However, inflation concerns are on the rise, with 53% of the respondents saying global core inflation will be higher over the next 12 months, up from 44% a month ago.
“Fear of recession has begun to lift slightly. But the picture is far from settled,” says David Bowers, independent consultant to Merrill’s poll. “The growing consensus is that we are in a stagflationary environment. We are worried about below trend growth and above trend inflation. Inflation is back on the radar screen and inflation trades are back on.”