Europe gets the nod as the best place to invest for the first time since at least 2009 in a Bloomberg survey of financial professionals, unseating the U.S.
Thirty-five percent of those surveyed in the Bloomberg Markets Global Poll said the euro zone would be among the one or two markets offering investors the best opportunities over the next 12 months.
It was the first time that Europe came out on top since the survey of traders, analysts, money managers and executives who are Bloomberg customers began asking that question in October 2009. The U.S., with a 33 percent share, fell to second, the first time it’s not been No. 1 since November 2010. China, which was respondents’ top choice back then, now is viewed as one of the worst markets to invest in.
Europe fared well in the poll in spite of the continued standoff between Greece and its creditors over payment of its debts and the risk that it may leave the euro zone.
“It’s like Connecticut withdrawing from the U.S.,” said Charles Brown, president of CB3 Financial Group in Geneva, Illinois, who took part in the poll. “Would we miss them? Yeah. Is it going to change the economy of the country? No.”
Other highlights of the April 14-15 survey: A majority of those contacted said the U.S. Treasury debt market is already a bubble or on the verge of being one, while more than three-quarters said the same of Internet and social networking stocks. Respondents were upbeat on the dollar: It was chosen as the asset of choice to go long now.
They were downbeat on oil, with only 12 percent expecting crude prices to rise above $75 per barrel this year and 41 percent not anticipating that price will be exceeded until after 2016. Russia, Brazil and China were seen as markets to avoid over the next 12 months, with investors saying the Chinese economy is in the worst shape in two and a half years.
About two in five polled described the euro region’s economy as improving, up from 14 percent in January. European investors were more optimistic than those in the U.S. and Asia, with almost half saying the area’s economy is getting better.
“Europe’s economy is improving, off an admittedly low base,” John Carlson, a poll participant and president of Epic Investment Management in Boulder, Colorado, said in an e-mail. “Also, Europe’s stock market has been strong, and that market probably has more predictive power than people recognize.”
The International Monetary Fund this month raised its forecast for the region’s growth in 2015 to 1.5 percent from 1.2 percent in January as a weaker currency and lower oil prices boost output.
The recovering euro economy is helping to allay deflation fears there, according to the poll. Three-quarters of those surveyed said deflation was a greater threat to the region than inflation over the next 12 months, down from 94 percent in January and the lowest level in a year.
The turnaround in investors’ assessment of the euro region followed last month’s launch of a 1.1-trillion-euro ($1.2 trillion) quantitative easing program by the European Central Bank. More than two of five investors now believe that the ECB and its president Mario Draghi have monetary policy about right, double those who said that in January. Draghi received a favorable rating from 68 percent of those polled.
Symptomatic of the renewed optimism about the region: The Euro Stoxx 50 Index has climbed 18 percent this year.
“Europe has some very good companies that may provide opportunity,” Stan Kramer, a poll participant and chief executive officer of First Kentucky Securities Corp. in Lexington, said in an e-mail.
Investors, though, do think that Germany and Chancellor Angela Merkel can do more to preserve the euro zone. About three in five said the region’s biggest economy could either boost borrowing and spending or allow other euro members to do so, or both, to help keep the zone intact.
Merkel said on April 22 that Germany won’t divert from its recipe of tighter budgets and economic overhauls in efforts to pull the euro area out of its malaise. “This government will continue to call for this course of action,” she said in a speech in Berlin.
The euro region’s brighter prospects spilled over to the rest of the world in the poll. Almost one-third of the 1,280 respondents portrayed the global economy as improving, up from a quarter who said that in January.
Investors were slightly less optimistic about the U.S. than they were three months ago. Just over half described the world’s largest economy as getting better, compared with more than three in five who said that in January.
Hammered by harsh winter weather and a stronger dollar, U.S. gross domestic product is forecast to have risen at an annual 1 percent rate in the first quarter, after climbing 2.2 percent in the final three months of last year, according to the median estimate of economists surveyed by Bloomberg.
The slowdown has helped push U.S. Treasury securities’ prices up and yields down as investors bet that the Federal Reserve will put off raising interest rates in response. The yield on the 10-year note stood at 2 percent at 4:45 p.m. in New York on Tuesday compared with 2.17 percent at the end of last year.
More than a quarter of those surveyed in the Bloomberg Global Poll said the Treasury market was already a bubble, while another 28 percent said it was on the verge of being one.
“U.S. Treasuries, and many government bond markets, are in a bubble,” Carlson said. “Not only are their yields at or near historic lows, but they offer yields below likely inflation.”
The deceleration in U.S. growth also has trimmed some of the dollar’s gains. The U.S. Dollar Index, which tracks the greenback’s performance against six of its counterparts, stood at 96.1 at 4:39 p.m. in New York on Tuesday, down from a 12-year high of 100.3 on March 13.
Poll participants see the dollar going still higher. About one in four chose the greenback as the best buy now, the highest score of any asset class in the poll.
“This is the beginning of a major bull move in the dollar,” Brown said. He sees the index rising to 120 over the next three years.
China stood out as a weak spot in the survey. Almost three in five depicted its economy as deteriorating, the worst performance since September 2012. Only one in 10 said it was improving.
China’s economy grew 7 percent in the first quarter from a year earlier, the slowest pace since 2009, according to government data released earlier this month.
A quarter of investors said Chinese markets would be among the one or two that would offer the worst opportunities over the next 12 months. Only Russia, with 32 percent, and Brazil, with 29 percent, fared worse.
The Bloomberg Markets Global Poll gathered responses from 1,280 Bloomberg terminal subscribers. It was conducted April 14 and 15 by Selzer & Co. of Des Moines, Iowa. The margin of error is plus or minus 2.7 percentage points. Source: Bloomberg