Bank of America Merrill Lynch’s latest survey of fund managers was released on Tuesday, and it’s not a pretty picture for the UK ahead of Scotland’s referendum.
“As opinion polls indicated the referendum for Scottish independence was too close to call, negativity towards UK stocks deepened,” said Michael Hartnett, the bank’s chief investment strategist.
UK equities are the least popular of all major classes this month. Sixteen per cent more investors are underweight than overweight on British stocks, and a net 14% want to be underweight in the year ahead.
More investors are now underweight UK equities than at any point since February 2013, when economists were still warning that the UK could enter its third recession since 2008.
To make matters worse, the UK’s performance against the world is now at its lowest level since 2011, and the index still seems to be heading down.
There’s a huge problem here, with investors simply not able to work out what the likely economic effect of independence might be.
For example, Morgan Stanley analysts suggest a “painful break-up” scenario for the UK could derail Britain’s strong growth completely and push the country into into recession.
In comparison, researchers at Bank of America Merrill Lynch suggest the split might slow down by growth by as little as 0.25 percentage points.