China, Brazil Top U.S. as Best Places for Investors, Poll Shows
U.S. Federal Reserve Chairman Ben S. Bernanke
Stephen Morton/Bloomberg
U.S. Federal Reserve Chairman Ben S. Bernanke.
U.S. Federal Reserve Chairman Ben S. Bernanke. Photographer: Stephen Morton/Bloomberg
Investors say they are seeing opportunity and taking on greater risk, looking more to emerging markets such as China, Brazil and India than developed countries, a Bloomberg survey shows.
The U.S. was in fourth place behind those economies in offering the most opportunity, in the latest quarterly Bloomberg Global Poll of 1,030 investors, analysts and traders who are Bloomberg subscribers. The world’s largest economy was also named the third-worst place to invest behind the European Union and Japan. Some respondents cited the Federal Reserve move to buy $600 billion of Treasuries as cause for concern.
“While professional investors can make money in these markets and protect themselves from the inevitable downturn, the market appreciation is being driven by the Federal Reserve, not underlying economic fundamentals,” Todd Lechtenberger, chief investment officer at Bodard Trust in Oklahoma City, said of the U.S., in a follow-up interview.
Still, the largest group -- a 39 percent plurality -- was bullish on the overall economic environment. Another 25 percent said things were getting back to normal, and 35 percent said they were still hunkering down, according to the poll conducted on Nov. 8 by Selzer & Co., a Des Moines, Iowa-based firm.
The Standard & Poor’s 500 Index has climbed 14 percent since Aug. 27, when Fed Chairman Ben S. Bernanke said the central bank was prepared to take additional action to spur growth. The Treasury-purchase plan that followed has been panned by several regional Fed presidents, as well as officials from Germany, China and Brazil.
‘Artificial Money’
Some poll respondents said the move -- known as quantitative easing because it seeks to loosen monetary policy by buying quantities of bonds rather than lowering short-term interest rates -- was giving a potentially dangerous jolt to the markets.
“There is a lot of artificial money moving the market,” said commodities trader and poll respondent Greg Metzger. “As the Fed continues to pump cheap money into the markets, the dollar will become further depressed and the commodities bubble will continue to grow.”
The UBS Bloomberg Constant Maturity Commodity Index has surged more than 18 percent since Aug. 27. Rising demand for oil and soybeans in China, as well as a drought in Russia that’s increased grain demand, are also combining to push prices higher for consumable commodities.
China’s No. 1
China was chosen by 33 percent of respondents as offering the best opportunities for investors over the next year, with Brazil second at 31 percent and India third with 29 percent. The U.S. was next with 23 percent, followed by Africa at 11 percent and Russia at 10 percent.
China’s economy grew 9.6 percent in the third quarter and inflation accelerated to the fastest pace in almost two years, the government said last month. Growth exceeded the 9.5 percent median estimate of economists in a Bloomberg News survey.
Brazil’s recent presidential election was seen as a positive sign by global poll respondents, with 33 percent saying Dilma Rousseff’s victory was good for investors. Twelve percent said it was bad, and 55 percent had no idea.
Rousseff has pledged to keep in place the policies of her mentor, President Luiz Inacio Lula da Silva, which helped the country win its first investment-grade rating in 2008 and led to a six-fold increase in stocks since 2003.
The International Monetary Fund last month raised its 2010 economic growth forecast for India, citing stronger consumer demand. The economy will expand 9.7 percent this year, the IMF said, more than the 9.4 percent the IMF estimated in July.
Biggest Losers
On the question of which markets offer the worst opportunities, 37 percent chose the European Union, with Japan coming in second at 30 percent. Twenty-four percent said the U.S. and 22 percent the U.K.
Assessments of the U.S. were divided: 32 percent of respondents said the economy is improving, while another 32 percent said it’s deteriorating. Thirty-six percent said the economy is stable.
Economists separately surveyed by Bloomberg said U.S. growth will strengthen as the Fed’s actions underpin confidence. The economy will steadily accelerate, reaching a 3.2 percent pace by the last quarter of 2011, according to the median forecast of economists polled from Nov. 3 to Nov. 9.
Respondents to the Bloomberg Global Poll were more upbeat about the world economy, with 44 percent seeing improvement, 37 percent saying it was stable and 18 percent predicting deterioration.
Drawn to Stocks
Investors predicted stocks would offer the highest return over the next year, with commodities being the next best investment. On the flip side, 49 percent said bonds will have the worst returns, while 19 percent chose real estate.
Fifty-three percent of respondents said they were increasing their exposure to stocks over the next six months, up 9 points from the last Bloomberg survey in September. Another 42 percent said they would be investing more in commodities, an increase from 36 percent.
Respondents said major stock indexes in the U.S., Europe and Asia would all rise, with the MSCI Asian Pacific Index drawing the most votes at 64 percent. Fifty-six percent said the U.S.’s S&P 500 Index would be higher.
Two European indexes, the Euro Stoxx 50 and the FTSE, fared slightly worse with just 42 percent and 43 percent, respectively, saying they would increase. The FTSE has risen 10.4 percent over the past year, while the Euro Stoxx 50 has fallen 1.7 percent.
Cutting Bond Holdings
On government bonds, 55 percent said they would reduce their holdings. Corporate bonds were more mixed: 35 percent said they were cutting exposure while 40 percent said they would maintain their current holdings.
The investors and analysts predicted that most asset classes would rise over the next six months, with crude oil prices getting the most support at 65 percent. Gold was expected to rise by 51 percent of respondents.
Forty-nine percent said the yield on the U.S. Treasury 10- year note would be higher in six months. The yield on the 10- year note has fallen to 2.65 percent from 3.84 percent at the beginning of the year.
Richard Koza, the founder and head trader of Atwel International s.r.o. in Prague, said he is bullish on U.S. companies. “They are full of cash without too much debt, with good demand abroad for their products and especially services,” he said.
Moody’s Investors Service said last month that U.S. companies are hoarding almost $1 trillion of cash, which it says shows borrowers are concerned the economy may tip back into recession.
The poll has a margin of error of plus or minus 3.1 percentage points.
To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
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