Where to? by Claudia Sonea

The situation of markets is not at going to improve, at least that is what 16 percent of fund managers believe. Due to the fact that risk aversion among fund managers reached the highest level in more than seven years most of them neutralized their long equities, short bond strategy and get insurance in case of another sharp fall in equities over the next three months. Merrill Lynch's latest monthly fund managers' survey showed that more than two-thirds of the asset allocators expected for the markets to deal with "stagflation" (above-trend inflation combined with below-trend growth). The protection taken against risk-averse led to a sharp rise in cash holdings, with a net 41 per cent of fund managers going for cash (a level last seen in the aftermath of the 9/11 attacks). Everything was generated by the fears that economy will be, if it is not already, in recession. Furthermore, pessimism is generally remarked when it comes to earnings and margins, with a record of the survey participants expecting corporate profits to disappoint over the coming year. David Bowers, independent consultant to the Merrill survey, states that global equities have become undervalued, according to participants that seem less and less interested in European equities for the first time in four years and warming to the US market. 10 per cent of fund managers would rather "overweight" the US equity market over the next 12 months and "underweight" European stocks in a global portfolio. 48 percent of fund managers believe equities were undervalued and bonds were overvalued. They need to find something to rapport to, a catalyst and then a decision will be made and they will be able to head for a certain direction. Don't go away, fund managers are the trend setters, therefore it is crucial to know what they are doing.

related story: http://news.yahoo.com/s/ft/20080213/bs_ft/fto021320081734388187;_ylt=AmO1UTAMR_t7ZkiuJwFwzSys0NUE

by Claudia Sonea for PocketNews (http://pocketnews.tv)

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