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Investors gloomy about growth

Fund managers are increasingly pessimistic about global growth expectations, inflation is still a concern and only bullishness on Japan bucks the trend, according to Merrill Lynch?s latest research.

For the first time since 2001, more fund managers expect the global economy to weaken than to strengthen, finds Merrill?s global fund manager survey. ?The euphoria we saw at the beginning of the year about the world experiencing a synchronized cyclical recovery has disappeared,? says David Bowers, chief investment strategist at Merrill Lynch. ?Whilst it doesn?t feel like a recession is around the corner, fund managers are clearly less confident that the recovery can be sustained.?

The outlook for corporate earnings has continued to deteriorate, with a net 2% of investors expecting worldwide corporate profits to improve over the next 12 months, down from 11% in June, 26% in May and 47% in April. The forecast for earnings per share fell another percentage point to 8%, a possible driver behind the increase in asset allocation to government rather than corporate bonds over the past three months.

Inflation anxiety

Investor anxiety about inflation was still high: 78% of the panel expect core inflation to be higher in a year?s time.

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