What Global Fund Managers Are Telling Investors

Between May 6, 2005 and May 12, 2005, Merrill Lynch (one of the world’s leading and most respected financial management and advisory companies) surveyed 339 fund managers from around the world on their views of the global economy.

Let’s just say the results weren’t very encouraging.

Fund managers in North America, Europe, and Asia presented Merrill Lynch analysts with the most negative results since 2001, with pessimistic views of global economic growth, corporate profits, and inflation.

Chief Global Strategist for Merrill Lynch, David Bowers, made the following comment Monday on the release of the report: “We have got a major shift in how fund managers perceive the world… We are now starting to see people position themselves for global growth disappointment.”


I find this particular survey interesting because it echoes the sentiments we’ve shared in PROFIT CONFIDENTIAL for some time now — that the world economy has set the stage for a major slowdown.

The fund managers who were surveyed, who oversee $1 trillion in assets, are clearly predicting global growth will weaken. Look at these statistics:

— 56% believe world economic growth will weaken over the next year (in March, only 33% of respondents shared this opinion) — The majority of fund managers have pulled back on equities and increased their positions in cash and bonds — In previous surveys, the negative views came from North American managers — in the current survey, we see negative outlooks from managers in Asia, Europe, and North America — Only 23% of respondents saw a stronger world economy ahead — 60% predict that corporate profits will drop in the next 12 months

What are these global fund managers telling investors like you and me?

These professional investors with a global eye are saying that, if you haven’t already, now’s the time to reassess your investment strategy.

Less risky investments, like cash, bonds, and Michael’s favorite, gold, are where the majority of your money should be in this changing global economy.

Stocks, on the other hand, are still a good place to invest for the higher-risk segment of your portfolio, but we won’t be seeing big, fast gains like we used to. The long term is likely going to be better for speculative stock market investors than the short term will be.

The global economic environment is definitely changing, and we’re going to see some tough times ahead. Reassess your portfolio and buckle your seatbelt because it’s going to be a bumpy ride for investors in every corner of the world over the next 12 months.