According to a new survey, conducted by Bank of America/Merrill Lynch., investments based in the United States are getting a boost due to investor fears over the impact of the Greek economy on the euro. The troubles in Europe may be giving a boost to the United States’ economy.
What the Survey Says
According to a news release by Bank of America/Merrill Lynch, the survey was attempting to find out where fund managers were buying securities. The survey polled 202 fund managers, managing a total of $530 billion valued in United States currency. The survey ran from 7 May to 13 May.
According to the news release, over a third of the fund managers polled felt that the US was a favorable climate for corporate earnings. A little over 40% of the fund managers surveyed said that that the eurozone, those countries that use the euro as their currency, was an unfavorable climate for corporate earnings.
An investor for Bank of America/Merrill Lynch, Gary Baker said, "The survey shows that investors have capitulated on Europe, beaten down by sovereign debt concerns and faltering growth expectations." In other words, the eurozone countries such as Greece and the countries that are extending financial aid to Greece are carrying too much debt and not experiencing enough economic growth.
Greece and the Eurozone
Right now, the dollar is gaining on the back of the economic problems in Greece. The dollar is currently valued at close to $1.21 Michael Woolfolk, senior currency strategist at the Bank of New York Mellon told the Philadelphia Enquirer, "The euro was experiencing something of a relief rally which could've pushed it back to $1.25, but the proposed regulatory changes soured the market and stifled the euro's recoup."
Meanwhile, Germany is banning “naked” short selling, which is when investors bet on securities that they don’t own. But, the very existence of these regulations is one of the factors that is casting doubt on euro-based investments.
In the same survey, respondents said that they do not expect to see a rise in interest rates in the United States or Europe any time soon. Fund managers surveyed think that the soonest the US Federal Reserve Bank and the European Central Bank expect to see a rise in interest rates is 2011. Almost two-thirds of the fund managers surveyed think that such a rise in rates is unlikely.
Meanwhile, fund managers are putting their bets and their clients’ money on investment vehicles here in the US.
Jon Pike - Pike is a Ph.D. in communication and writes about activism and popular culture topics for Suite101.
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