Seven out of 10 fund managers say they expect the global economy to deteriorate over the next 12 months, according to Merrill Lynch’s August Survey of Fund Managers, noting, however, that 67% don’t expect the weakness to result in a recession. More than half of respondents (52%) says they predict corporate profits will likewise drop, up from 34% in the June survey, while 29% see growth of 10% or more (down from 39% in June). Pessimism about the global economy has helped boost bonds, with only 22% viewing them as overvalued, compared with 48% feeling that way in May. In addition, for the first time in three years, the percentage of those who say they are underweight in bonds has dropped, from 65% in June to 46% in the current survey. Risk aversion is at an all-time high – 33% of asset allocators.