The number of investors shifting their portfolio into equities has hit an almost record high as asset allocators predict a steep rise in inflation, a monthly survey has shown.
A net 61% of respondents to a survey by Bank of America Merrill Lynch—featuring 228 panellists with a combined $674 billion in assets—said they were overweight equities this month. This is the second highest number since the survey began in 2000 and falls just short of the record number saying the same in early 2011.
This move was a reflection of respondents expecting a “significant increase” in inflation, the bank said.
A net 71% said they foresaw global core CPI to be higher in 12 months’ time. This marked a cyclical high and saw investors move in to commodities—which are particularly sensitive to inflation—with their highest conviction for more than a year.
Today, the Bank of England announced that inflation in the UK had made its biggest monthly increase since 2012, hitting 1.9% in June up from 1.5% May.
While respondents saw global inflation rising above trend level, they thought global growth would trail, but still a net 69% said the global economy would expand in the next 12 months.
With this in mind, many believed equities were already over-valued. A net 21% said investors were by-in-large paying too much for publicly listed stocks—the highest reading since 2000.
But this would not deter them from buying into the asset class. However, they urged business owners to spend more on their companies. For the seventh straight month, the number of asset allocators calling for capital spending has hit a record high, the bank said. A net 71% of respondents said companies were underinvesting—the highest reading of this measure since the bank began asking the question in 2005.
The survey was conducted between July 3 and 10.
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