You will meet a tall, handsome recovery

By Buttonwood

IT IS November, and the Christmas lights are out on Regent Street, the red cups are on offer at Starbucks and financial commentators are making their forecasts for 2015. The best way of judging the consensus is to read the survey from Bank of America Merrill Lynch of global fund managers. And their outlook is upbeat. A net 47% of managers think the economy will strengthen in the next year (in other words, the balance of those who think it will strengthen minus those who think it will weaken) and a net 42% think corporate profits will grow. Both figures are more positive than October. Last month, managers were reducing risk; now a small plurality (2%) is increasing it.

A net 46% of managers are overweight equities. Asked about the best performing asset class in 2015, 63% of managers opt for equities, 22% for currencies and commodities, 5% for government bonds and just 4% for corporate bonds. All this sounds remarkably like the mood at the end of last year, which as I pointed out at the time, was very negative for bonds even though inflation was falling. Twelve months later and the long-term decline in government bond yields looks as robust as ever.