WASHINGTON – International investors are the most bullish on stocks in at least 3 1/2 years, with close to two-thirds planning to raise their holdings of equities during the next six months, according to a Bloomberg survey.
As the global financial and business elite prepared to gather last week in Davos, Switzerland, for their annual forum, 53 percent of respondents to the Bloomberg Global Poll also said equities will offer the highest return in the next year. That’s a 17 percentage point jump from the last poll in November and the most since the quarterly survey of investors, analysts and traders who subscribe to Bloomberg began in July 2009.
Behind the enthusiasm for shares: growing confidence in the U.S. economy and ebbing concerns about Europe. America is in its best shape in two years, according to the poll, with a majority of the 921 surveyed on Jan. 17 describing the economy as improving. In a sign the euro-area’s three-year debt crisis is easing, only 45 percent said the region’s economy is still deteriorating, down from seven in 10 two months ago.
There does appear to be some cautious optimism that things are slowly being resolved, Ben Kelly, an equity analyst at Louis Capital Markets in London and a poll participant, said in an email. There are some positive shoots that people are grabbing on to.
The signs of greater confidence in the economic and equity outlook lend an upbeat tone to the five-day gathering in Davos of 2,500 executives, policymakers, investors and academics. Delegates include German Chancellor Angela Merkel and European Central Bank President Mario Draghi, both of whom won praise in the poll. Goldman Sachs Chief Executive Officer Lloyd Blankfein and billionaire investor George Soros will also be there.
There’s a great sense of relief we dodged a lot of bullets in 2012 – we didn’t go off the fiscal cliff in the U.S., Europe didn’t have a meltdown and China didn’t have a hard landing, said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Mass. There are definitely pockets of good news with recoveries in North America and parts of Asia gathering momentum.
The U.S. came out on top with 38 percent when investors were asked which one or two markets would offer the best opportunities over the next year.
The U.S. is the best place to invest for the next five years because of the commitment by the Federal Reserve to inflate the economy, Ron Anari, who took part in the poll and who is a senior vice president at ICAP in Jersey City, N.J., said in an email.
Thirty five percent of those surveyed think that European Union markets will offer the worst returns over the coming year. That was down though from 41 percent in November and 62 percent in May.
Although a majority don’t believe recent gains in European bond markets signal the crisis is over, 44 percent disagree – compared with 28 percent a year ago. Thirteen percent say they will increase exposure to the region’s sovereign debt in the next six months, almost double the November level. Fifteen percent say they will increase exposure to the euro in the next six months, up from 8 percent.
The Bloomberg Global Poll was conducted Jan. 17 by Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 3.2 percentage points.