INVESTORS ARE becoming increasingly concerned that the world is heading for a serious economic slowdown but have pared back their concerns about inflation, a Merrill Lynch survey showed yesterday.
The investment bank's August poll of 193 fund managers also showed a shift in favour of US assets, with a more positive attitude towards the dollar.
The poll showed investors to be highly cautious and somewhat gloomy about the future. Some 48 per cent of respondents said they considered it likely the global economy would experience recession in the next 12 months, up from 41 in July and 34 per cent in June.
A consequence of this is that the poll suggested inflation was a decreasing concern, in contrast to recent surveys that had shown price rises and stagflation as worries.
Back in June, 59 per cent of respondents said they expected higher inflation in 12 months' time. In Wednesday's survey, 49 per cent said it would be lower. This mood was particularly strong among European investors, whose inflation expectations, Merrill said, had fallen to lows not seen since 2001.
The fall in inflation expectations fed into a lowering of expectations for interest rates. Some 41 per cent of respondents said they expected short-term rates to be lower in a year's time versus 27 per cent who thought that in July.
The survey showed that investors have become more bullish on the dollar although polling closed before the currency's latest surge.
Some 63 per cent of respondents said the greenback was the currency most likely to appreciate over the next year on a trade-weighted basis. - ( Reuters)
