The U.S. receives its highest rating from international investors in more than two years on new optimism that the world’s largest economy will weather the financial crisis in Europe and avoid a recession in 2012, according to a Bloomberg poll.
More than two in five of those surveyed -- 41 percent -- identify the U.S. as among the markets that will perform best over the next year. That’s up from less than one in three who felt that way in September and is the biggest percentage for the U.S. since the survey began in October 2009. It’s also almost double that of the next two top-rated markets, Brazil and China, according to the quarterly Bloomberg Global Poll conducted Dec. 5-6 of 1,097 investors, analysts and traders who are Bloomberg subscribers.
The U.S. “may not be in the best shape ever, but compared to others it should outperform,” Alexis Laming, a poll respondent and associate director for Arab Bank (Switzerland) Ltd. in Geneva, says in an e-mail. It has “good growth potential for next year.”
Less than a quarter of investors say they expect the U.S. to relapse into recession within the next year, according to the poll. In September, half those surveyed forecast a U.S. economic contraction within that time frame.
U.S. respondents are more optimistic about the American market than their counterparts overseas: More than half pick it as a best-performing market for 2012 compared with a third of non-U.S. investors who do the same.
Investors also give a vote of confidence in the U.S. Treasury market. Seven in 10 say Treasuries will remain the safest investment for at least the next year, while 47 percent say they anticipate the market will have that distinction for at least the next three years.
European investors are the most skeptical about U.S. government bonds: Almost 40 percent say the securities aren’t the safest investment now.
The poll follows the release of a series of stronger-than- forecast economic statistics in the U.S. The unemployment rate fell last month to 8.6 percent, its lowest level since March 2009, while manufacturers reported that their business expanded in November at its fastest pace in five months. Still, the jobless number compares with the 5.0 percent rate at the start of the last recession in December 2007.
Global Prospects Better
The prospects for the global economy also are improving, though not as much as for the U.S., according to the poll. One in three investors -- 33 percent -- say they expect the world economy to fall into recession within the next year, down 10 percentage points from September.
Stocks, especially U.S. shares, are the asset class of choice, based on the poll. Almost two of five surveyed identify equities as the investment that will offer the highest returns over the next year, while 43 percent say they plan to increase their exposure to stocks (INDU) in the next six months. That’s up from 39 percent in September.
Almost half of investors say they expect the Standard & Poor’s 500 Index to rise in the first half of next year. That’s a higher percentage than for stock markets in Europe and Asia. The S&P index yesterday rose 0.1 percent in New York to 1,258.47, a three-week high.
“Equity valuations are currently very attractive and have quite a bit of room to run,” John Macdonald, a poll participant and account executive at Balance Sheet Solutions LLC in Warrenville, Illinois, says in an e-mail, adding that his comments shouldn’t be construed as a recommendation to buy shares. He sees “a bona fide bull market cycle” developing as an expanding U.S. jobs market boosts consumer confidence and the European Union reaches “some form of resolution” of its debt crisis.
Until that happens, though, investors are steering clear of Europe, according to the poll. More than half those surveyed name the EU as among the markets that will suffer the worst returns over the next year.
Asian investors are the most downbeat on Europe: More than three in five say its markets will perform the worst in 2012. Forty-three percent of Europeans single out their region as a market to avoid.
A majority of respondents say they plan to reduce their exposure to European sovereign debt and the euro over the next six months. The currency stood at $1.34 at 4:08 p.m. in New York yesterday.
EU on ‘Precipice’
“I am dumbfounded by the current situation globally,” says survey respondent David Jaderlund, a general partner at Jaderlund Investments in Santa Fe, New Mexico. “The EU is on the precipice, yet is valued” at 1.34 to the dollar, he adds in an e-mail.
European leaders will meet in Brussels on Dec. 8-9 in their latest attempt to tackle the region’s financial crisis. As part of that effort, German Chancellor Angela Merkel and French President Nicolas Sarkozy have called for new rules to tighten euro-area economic cooperation.
The brightening outlook for the U.S. and world economies has encouraged investors to become less conservative with their money, the poll results show. About a quarter of those surveyed intend to increase their holdings of commodities over the next six months, up from 19 percent in September.
Pluralities of more than 40 percent say they expect prices for both gold and crude oil to rise in the first half of next year. Gold futures for February delivery fell 0.2 percent to settle at $1,731.80 an ounce at 1:46 p.m. on the Comex in New York yesterday. Prices have climbed 22 percent this year. Crude oil for January delivery rose (SPX) 29 cents to $101.28 a barrel on the New York Mercantile Exchange yesterday. Futures are up 11 percent this year.
Fewer Cash Reserves
Thirty-six percent of investors plan to build their cash reserves over the next six months. That’s down from 42 percent in September, which was the highest percentage reported since the poll began asking that question in June 2010.
Bonds are identified as the asset class that will offer the worst returns over the next year: Almost three in 10 singled them out for that distinction. Even though U.S. Treasuries are seen as safe, almost two in five respondents say they’ll reduce their holdings in the securities in the first half of 2012.
Forty six percent forecast that the yield on the 10-year Treasury note will be higher six months from now, compared with 40 percent who said that in September, the poll shows. The yield on the 10-year note stood at 2.09 percent at 4:59 p.m. New York time yesterday.
The dollar still finds favor among investors. More than one in three say they are increasing their holdings of the U.S. currency; only 14 percent are reducing them.
Thirty-eight percent of those contacted say the U.S. economy is improving, almost four times as many as those saying that in September. About a quarter say it is deteriorating, down from three in five in September. The balance described the U.S. economy as stable. Less than one in 10 expect another financial meltdown in the U.S. within the next year.
The world economy is described as deteriorating by 54 percent of those polled, compared with 68 percent who felt that way in September.
Geopolitical events may alter the outlook. Twenty-four percent of those surveyed expect a military strike against Iran’s nuclear program within the next year. Another 35 percent anticipate that occurring within the next two to five years.
The Bloomberg Global Poll was conducted by Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 3.0 percentage points.
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