Investors: U.S., Japan In, China, Europe Out
Optimism for Japan and the U.S. is on the rise among investors, with China and the E.U. being downers on the global macroeconomic picture. According to a poll of 906 Bloomberg customers, 61 percent view the U.S. as improving, and another 48 percent feeling the same for Japan. Japanese sentiment is on the ups due to Prime Minister Shinzo Abe being seen as a liberator of his country’s economy, with 66 percent of responders being optimistic about his leadership. Shinzo is expected today to announce strategies to increase agricultural output triple infrastructure exports by 2020.
Moreover, 34 percent are confident that monetary stimulus brought about by the Bank of Japan will both increase inflation―which is needed in Japan’s long battle with deflation―and spur domestic growth for the island-nation. Another 35 percent, while not so keen on the growth aspects of the Bank’s measures, are certain that it will drive up Japanese stocks through a cheaper Yen, prompting overall opinion to make Japan the second most lucrative market to invest in behind the U.S.
Bloomberg respondents felt quite optimistic about the U.S.’s economic recovery, and a leading 53 percent declared it the best investment opportunity over the next year. Confidence stems from favorable views of the Federal Reserve and leadership under Chairman Ben Bernanke, with a runaway 57 percent declaring the U.S. Central Bank as the best handler of economic woes among all national banks in question. The nearest polled bank was the Bank of Japan, at 13 percent.
Europe continues to be the primary drag on a return to global economic prosperity, with 61 percent viewing it as deteriorating, and a majority 36 percent viewing Europe’s debt crisis as the leading risk to the global economy in 2013. This was reinforced by the nearly half of respondents who declared Europe the worst opportunities for investors in 2013, and 67 percent of those polled expecting Greece and Cyprus to default on its sovereign debt. France’s Francois Hollande was also viewed in an extraordinarily negative light, with over 3 in 4 declaring pessimism about the investment climate in France due to his policies. Perhaps most damning, 57 percent feel that Europe’s debt crisis will deepen further based their observation of bond markets.
China is also increasingly viewed as bearish among investors and analysts, as growth there has slowed recently. While only a small percentage actually saw China’s economy as improving, a majority 89 percent were virtually halved between seeing the world’s second largest economy as deteriorating or stable. It was rated the second worst investment opportunity for the coming year, only behind Europe, and the majority of those polled expecting China’s growth rate to slow to somewhere between 6 and 7 percent over the next five years.
So what does this mean for the average investor? Stocks were viewed as an enticing buy for 2013, as a majority claimed it as the best investment, and also indicated their own plans to increase exposure to equities. Strong majorities also predicted that Japan’s Nikkei 225 and the S&P 500 would be the year higher six months from now. Bonds were the strong choice to bring in the worst returns, and over 40 percent indicated they would reduce exposure to both U.S. and Japanese bonds. For the time being, it appears that stocks both in the U.S. and Japan are on the rise and represent lucrative opportunities for would-be buyers.