Add global money managers to the list of people who are growing increasingly skeptical about the health of the global economy.
Bank of America released its latest monthly fund manager survey, and the overall impression was that the pros are feeling grumpy.
“Rising equity prices have failed to lift investor gloom and we still see a quarter of investors expecting a global recession while hopes for further policy easing have been delayed,” said Michael Hartnett, Bank of America’s chief global equity strategist, in a release that accompanied the survey results.
The views of professional money managers can be influential, because they are the so-called “smart money.”
Since they control so much money through their investments – the survey used 261 panelists, managing a total of $708-billion (U.S.) worth of assets under management – their mood swings can have a big impact on the stock market.
And right now, their mood is dark amid an avalanche of gloomy economic reports and the start of the second quarter earnings season in the United States.
According to the survey, a net 38 per cent of respondents believe corporate profits will worsen in the coming 12 months, as operating margins decrease.
That marks a sharp 39 percentage point drop since May, a decline that Bank of America compares to the evaporation of investor confidence last summer during a particularly nasty flareup of the European debt crisis.
Meanwhile, the outlook for the global economy also took a step down.
A net 13 per cent of respondents believe the global economy will weaken in the coming year.
While that’s down just two points from the previous survey, the outlook had plunged 26 percentage points between May and June.
While most respondents believe the Federal Reserve will give the economy a boost with another round of quantitative easing – a form of economic stimulus that comes from buying bonds – they see little chance of a helping hand before the fourth quarter.
The level of overall grumpiness on the part of professional money managers shouldn’t come as a big shock, of course, given the outbreak of downgrades.
In fact, Ed Yardeni of Yardeni Research noted on Tuesday that “downward revisions are in fashion this summer.”
On Monday, the International Monetary Fund cut its outlook for global economic growth this year and next.
It now sees the economy growing 3.5 per cent in 2012, down from 3.9 per cent growth in 2011 and 5.3 per cent in 2010.
In 2013, the IMF sees the economy picking up only slightly, to 3.9 per cent – down from a 4.1 pr cent estimate earlier in the year.
Disappointing U.S. retail sales, released on Monday, have also led to some downgrades of U.S. quarterly economic growth.
Bank of America estimates that U.S. gross domestic product will expand by just 1.1 per cent at an annualized clip in the second quarter.
It is also dampening expectations for any sort of pick-up in the second half of the year, forecasting that GDP growth will slow to 1 per cent at an annualized pace in the fourth quarter.