Investors are extremely mindful of global monetary policy these days, according to Merrill Lynch's March Survey of Fund Managers. For the first time since the survey was introduced two years ago this month, a majority of investors are concerned about global inflation rates and believe the economy is operating above trend. According to the results, 51% believe global core inflation will rise over the next year, 45% of anticipate an increase in commodity within the year and 81% of managers surveyed expect short term rates to rise within 12 months, up from 68% in February.
"Fund managers are coming to terms with the prospect of a monetary headwind for equities in 2006," noted David Bowers, chief global investment strategist at Merrill Lynch, of the results. "What's surprising is that inflationary concerns have spun into view at a time when growth and profit expectations are weakening."
Other findings indicate that managers expect within the year the global economy to weaken, a decline in corporate profits, higher than normal equity market volatility and a decline in investment in emerging markets. Meanwhile, 75% of survey participants believe Japan has emerged from its "period of instability," with 21% responding that Japan is "definitely" out of deflation, 54% saying it "probably" is and 20% indicating it is "too soon to be sure."
"We expect Bank of Japan Governor Fukui may follow the recent Greenspan script of normalizing rates at a measured and well-signaled page," remarked ML's Japan strategist Jesper Koll. "It would take about a year to get to neutral if the BoJ decides to raise rates by 25 basis points every two months."
"Fund managers are coming to terms with the prospect of a monetary headwind for equities in 2006," noted David Bowers, chief global investment strategist at Merrill Lynch, of the results. "What's surprising is that inflationary concerns have spun into view at a time when growth and profit expectations are weakening."
Other findings indicate that managers expect within the year the global economy to weaken, a decline in corporate profits, higher than normal equity market volatility and a decline in investment in emerging markets. Meanwhile, 75% of survey participants believe Japan has emerged from its "period of instability," with 21% responding that Japan is "definitely" out of deflation, 54% saying it "probably" is and 20% indicating it is "too soon to be sure."
"We expect Bank of Japan Governor Fukui may follow the recent Greenspan script of normalizing rates at a measured and well-signaled page," remarked ML's Japan strategist Jesper Koll. "It would take about a year to get to neutral if the BoJ decides to raise rates by 25 basis points every two months."
