Investor Confidence in Profit Growth “Deteriorating” -- BofA

Fewer investors than at any time since April 2009 believe that corporate profits can grow by more than 10%, according to the July survey of fund managers by BofA/Merrill Lynch, a division of Bank of America Corp. (NYSE: BAC). Some 69% of those surveyed expect corporate profits to grow by less than 10% in the coming year. A net 58% expect operating margins to drop as well.

From the press announcment:

July’s survey highlights that corporate profit expectations have to catch up with the downgrade in the economic outlook we have seen the past two months,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research. “Rising equity prices have failed to lift investor gloom and we still see a quarter of investors expecting a global recession while hopes for further policy easing have been delayed,” said Michael Hartnett, chief Global Equity strategist at BofA Merrill Lynch Global Research.

On the European financial crisis, nearly a third of respondents see a risk of a negative shock to Germany’s economy, more than triple the number from the June survey. Confidence in Ireland’s recovery has grown in July, while only 37% of those surveyed think that Greece will be able to remain a member of the single currency union.

Respondents also believe that gold is currently fairly valued at around $1,600/ounce and 12% of those surveyed think oil is undervalued. BofA/ML’s conclusion is not particularly a happy one for consumers: “The last time oil was seen as undervalued preceded a surge in the oil price.”

Paul Ausick