A Merrill Lynch survey of 290 managers found that 17% of asset allocators are planning to increase their exposure to U.S. equities, MarketWatch reports. The survey participants manage a total of $945 billion in assets.

According to the survey, the change can be attributed to the value of the dollar, and the reversal of investor euro/short dollar positions in November

A net 42% of fund managers find U.S. equities to be the most overvalued asset class. Though high, the number is the lowest in three years. Last month, 44% of fund managers found U.S. equities to be the most overvalued.

The survey concluded that 31% of fund managers are planning to underweight U.S. equities over the next year, though the number was 37% last month.

Pharmaceutical stocks were found to be the most popular sector, as 39% of fund managers are overweight pharmaceuticals. Other more successful stocks included insurance and bank offerings. But utility stocks were not popular, with a 52% underweight rating.

The survey also showed that 49% of managers want to increase capital spending, up from 43% last month. Also, only 37% of managers want companies to return cash to shareholders, from 43% a month ago.

"Companies are now under pressure from shareholders to stop being so cautious, to stop running themselves for cash and to start running themselves for growth again," said David Bowers, a strategist at Merrill Lynch.

Flexibility in the global economy was found as the driving force behind companies' desire to raise capital expenditure.

According to the survey, 5% of fund managers said their risk levels are below normal, as opposed to 20% last month.

 

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