US equities are the primary beneficiary of the global economic recovery, with a net 16 per cent of asset allocators overweight on US stocks in December, up from 1 per cent in  November, according to the BoA/Merrill Lynch Survey of Fund Managers for this month. 

The report attributes the increase in US equity confidence to the European sovereign debt crisis continuing. A net 4 per cent of those surveyed are underweight eurozone equities, compared with a net 15 per cent overweight in November.

The survey recorded evident bullishness towards the US dollar with a net 36 per cent expecting it to make gains in 2011, up from a net 14 per cent in November. In the US regional survey, the net percentage of US investors expecting double-digit profit growth has doubled month-on-month to 40 per cent.

“Despite rising confidence in global growth, the survey shows that Europe is losing investor support as political procrastination and banking concerns overshadow a strong corporate outlook,” said Gary Baker, head of European equities strategy at BoA Merrill Lynch Global Research.

“The pending new tax deal in the US combined with QE2, has restored confidence in the prospects of US companies, at a time that Europe is out of favour and investors are questioning Chinese growth prospects,” said Michael Hartnett, chief global equity strategist at the firm’s research unit.

A net 26 per cent of European respondents expect the region’s economy to improve in 2011, up from a net 23 per cent in November.

“Europeans are looking beyond the noisy process of politics, but believe that a solution to the sovereign debt crisis will be found, and that economic growth and corporate profits will progress in the coming year,” said Patrik Schöwitz, European equities strategist.

Meanwhile, a net 44 per cent of those surveyed predict the world’s economy to strengthen in 2011, compared to 35 per cent a month earlier. A net 51 per cent anticipate corporate profits improving next year, up from 36 per cent in November. At the same time more investors believe that inflation is likely to rise with a net 61 per cent of the panel forecasting higher core inflation in 2011.

In terms of sector-based preferences, technology, which was number one for 11 months, has been ousted by energy. A net 38 per cent of asset allocators are overweight energy, up sharply from a net 24 per cent in November. A net 34 per cent of the panel is overweight technology, a monthly fall of one percentage point. Another sector that did well was materials, which went up by 8 per cent .

A total of 209 fund managers, managing a total of $569 billion, participated in the global survey from 3 December to 9 December whilst 174 managers, managing $401 billion, participated in the regional surveys. The survey was conducted by BoA Merrill Lynch Research with the help of market research company TNS.