Bullish on the U.S.



Economic growth in the U.S. dropped to 2.2 percent in the first quarter, job creation slowed and unemployment stayed above 8 percent, where it has been for more than three years. Descriptions of the country’s recovery range from weak to fragile to inadequate. Still, global investors say the U.S. economy is more attractive than any other.

Forty-six percent of respondents to the quarterly Bloomberg Global Poll pick the U.S. as among the markets that will offer the best returns over the next year. That’s double the percentage choosing China, which was the second most popular in the survey of Bloomberg Professional service subscribers. This is a complete reversal from the poll results a few years ago, when China, India and Brazil were preferred.

“There is no other choice than the U.S.,” says Kenichi Katsuhara, a credit-default-swap trader with Aozora Bank Ltd. in Tokyo and a poll participant. “Companies in the U.S. are chugging along.”

The flip side of the optimism about the U.S. is a growing pessimism about Europe. While 82 percent of those polled say the American economy is stable or improving, 84 percent say the euro zone is deteriorating. A lopsided 80 percent of investors say any evidence that Europe’s sovereigndebt turmoil is moderating will be temporary, with the crisis likely to deepen again. And 57 percent say one or more countries will probably drop out of the euro this year; 38 percent say that won’t happen.

Financial professionals show a similar preference when asked which central bank has done the better job: The U.S. Federal Reserve comes out far ahead of the European Central Bank. Investors favor pump priming, too. Fifty-three percent say government stimulus has been more effective for struggling economies, against 34 percent who favor government-mandated austerity, a key part of the European Union crisis response.

Billionaire investor Wilbur Ross shares the bias for the U.S. economy seen in the poll. Speaking at a May 8 lunch hosted by BLOOMBERG MARKETS, he said he’s optimistic about the progress of the American recovery and alarmed by the public reaction against the fiscal discipline that EU leaders are trying to impose.

Ross is concerned, however, about what may happen in the U.S. at the end of this year, when income tax cuts are set to expire and deep across-the-board spending reductions are scheduled. “That’s too big a hit for the economy to take,” he said. While Congress and the president will try to work out a compromise to blunt the effect of the higher taxes and spending cuts, Ross expects them to fail: “It’s going to be another freak show at the end of the year.”

Ross is not alone in his lack of faith in the political system. Republicans in Congress are seen unfavorably by 60 percent of poll respondents, while Democrats fare only slightly better, getting a 55 percent unfavorable rating.

RICH MILLER COVERS ECONOMICS AT BLOOMBERG NEWS IN WASHINGTON. This email address is being protected from spambots. You need JavaScript enabled to view it.

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The Bloomberg Global Poll is a quarterly survey of traders, analysts, investors and executives. The poll of 1,253 Bloomberg Professional service subscribers was conducted on May 8 by Selzer & Co. of Des Moines, Iowa. The margin of error is plus or minus 2.8 percentage points.


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