As per the latest survey conducted by Bank of America Merrill Lynch (BofAML) the percentage of global fund managers who think that there is a possibility of a US recession in the next one year has been highest since 2011.
In its Global Fund Manager Survey, BofAML has concluded that more than 50 percent of the fund managers surveyed have felt the US economy is at the brink of recession. Half of as many as 171 managers with collective assets under management (AUM) of $455 billion argued that corporates were overleveraged and should take measures to improve their balance sheets.
Moreover, around 34 percent of the managers further added that a US recession is likely in next one year while 64 percent think one is unlikely. Notably, this is the highest probability of US recession predicted by fund managers since October 2011. The recession fear of 2011 came after Standard & Poor's (S&P) downgraded US credit rating from AAA to AA+ in August 2011. Further, S&P also highlighted the potential downgrade concern in the credit rating of France as well.
The equity market globally reacted sharply to the development with major markets showing steep fall in their values. As per other findings of the survey, more than 33 percent of the respondents have taken measures against a possible sharp fall in equity markets in coming three months which also is the highest net score since the survey started in 2008 at the height of global economic recession.
Last week Michelle Meyer, the bank's chief US economist, had said: "...And this time, we are worried. We now have a number of early indicators starting to signal heightened risk of recession."
Among all the participants of the survey, 46 percent of the investors wanted corporates to spend cash on improving their balance sheets. In contrast, only 13 percent of the fund managers argued that corporates should return cash to shareholders.