- Published on Thursday, 29 November 2012 19:58
- Written by Bloomberg News
The
world economy is in its best shape in 18 months as China’s prospects
improve and the US looks likely to avoid the so-called fiscal cliff,
according to the latest Bloomberg Global Poll of investors.
Two-thirds of the 862
surveyed described the global economy as either stable or improving.
That’s up from just over half who said that in September and is the most
since May 2011.
The US came out on top
for the eighth straight quarter when investors were asked which markets
will offer the best opportunities over the next year. China ranked
second, reversing a decline to fourth in the September poll of
investors, analysts and traders who are Bloomberg subscribers.
The European Union, beset by a debt crisis, was seen offering the worst returns.
“The global economy is
improving, recovering and healing, thanks to the US and the emerging
markets,” said Andrea Guzzi, a poll respondent and vice president of IST
Investmentstiftung füer Personalvorsorge, which manages money for Swiss
pension funds. “More people are becoming wealthy, less and less are
poor.”
Stocks were seen as
the asset of choice, with more than one in three of those surveyed on
November 27 forecasting equities would have the best returns in the
coming year.
Real estate came in
second: Just less than one in five investors singled it out favorably,
the best showing since the quarterly poll began in July 2009. Bonds were
seen as offering the worst returns.
The Federal Reserve is
expected to provide continued support to the bond market after its
Operation Twist program ends next month, according to the poll. About
three in four said the US central bank would begin outright purchases of
Treasury securities after its plan for swapping short-dated securities
for longer-dated ones expires.
A plurality—two in
five—said the Fed also would continue buying mortgage-backed securities
into 2014, a strategy dubbed QE3 by investors, shorthand for the third
round of quantitative easing by the central bank.
“The
Fed is being very clear about monetary policy,” Gala Prada, a poll
respondent and portfolio and asset manager for Fiatc Mutua de Seguros y
Reaseguros, a Barcelona-based insurance company, said in an e-mail. “If
the economy doesn’t improve, there will be a QE4 or more asset
purchases.”
The growing optimism
among investors about the world economy was not reflected in their views
of the prospects for the financial services industry. About seven in 10
said they expect large banks to reduce payrolls further in the next
year after cutting at least 188,000 jobs over the last two years. A
majority blame regulatory changes for the reductions.
Banking authorities
have tightened rules and raised capital standards on banks after the
worst financial crisis since the Great Depression forced governments to
spend billions of dollars to rescue ailing financial institutions.
“Many
countries have oversized banking sectors, which need to go back to more
sustainable sizes,” Guzzi said in an e-mail from Zurich.
The optimism on the
world economy is based in part on an expectation that the US will avert
$607 billion in automatic spending cuts and tax increases scheduled for
January 1. Three out of four surveyed anticipate that President Barack
Obama and Congressional leaders will reach a short-term agreement to
avoid the fiscal cliff.
The 34-nation
Organization for Economic Cooperation and Development in Paris warned
this week that the world economy would tip into recession if the US
failed to act.
Close to half of
investors said they plan to increase their exposure to equities over the
next six months, up from less than two in five in September.
In Photo: The
Federal Reserve is expected to provide continued support to the bond
market after its Operation Twist program ends next month, according to
the poll. (Bloomberg)
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