Optimism over US corporate profits hits record

Most fund managers believe the U.S. is the best place for corporate profits, according to a Bank of America Merrill Lynch Global Research report.

The bank’s September Fund Manager Survey found that investors are bearish on global growth, and the U.S. continues to be the most favorable region in which to invest.

When asked about their regional expectations for corporate profits, a net 69 percent of those surveyed found the U.S. to be the most favorable region – a 17-year high.

Twenty-four percent of fund managers surveyed expect global growth to slow in the next year – compared to the 7 percent in August.

“Investors are holding on to more cash, telling us they are bearish growth and bullish US decoupling,” Michael Hartnett, the bank’s chief investment strategist, wrote in the report. “Fund managers are signaling that they are starting to price in a hawkish Fed.”

Investors increased the amount of money they allocated to U.S. equities by 2 percentage points to 21 percent overweight. Investors are the most overweight since January 2015 and the U.S. is the most favored equity region for the second month running.

A trade war remains the risk most commonly cited, followed by a China slowdown and quantitative tightening.