Investors banking on spring rate hike: Merrill survey
Fund managers warm up to eurozone stocks
NEW YORK (MarketWatch) — Investors are increasingly expecting the Federal Reserve to raise interest rates in the spring of 2015, with the dollar forecast to rise as a result, according to the Bank of America Merrill Lynch Fund Manager Survey for September.
Nearly half of the fund managers polled, 48%, believe the U.S. central bank will introduce what would be its first rate tightening in nine years in the second quarter of next year. That’s up from 38% last month. Against that backdrop, a net 86% of the respondents see the dollar strengthening further against the euro and yen.
“As the first Fed rate hike since 2006 draws closer, we’ll see a new U.S. dollar bull market and movement out of bonds,” said Michael Hartnett, chief investment strategist at B. of A. Merrill Lynch Global Research in the release.
The survey comes as the Fed gets ready to kick off a two-day policy meeting Tuesday, with fears the central bank could conclude the meeting by signaling a rate hike sooner than previously expected. Read: Eight keys to Fed’s September meeting.
Another key finding in the fund-manager survey was the stance on the European Central Bank and eurozone equities. Investors are increasing exposure to the region’s stock markets after the ECB at its September meeting again cut interest rates and said it would start buying asset-backed securities. A net 18% of the respondents are now overweight euro-area stocks, up from a net 13% a month ago. In addition, more of the panelists see the ECB embarking on a full-scale quantitative-easing program by the end of the year, with 42% believing in QE now, compared with 32% in August.
“While investors welcome the ECB’s actions, the region is still lacking its growth mojo. It will take time for growth to materialize from policy action, and there are no guarantees it will,” said Manish Kabra, European equity and quantitative strategist at Merrill Lynch.
Nearly half of the fund managers polled, 48%, believe the U.S. central bank will introduce what would be its first rate tightening in nine years in the second quarter of next year. That’s up from 38% last month. Against that backdrop, a net 86% of the respondents see the dollar strengthening further against the euro and yen.
“As the first Fed rate hike since 2006 draws closer, we’ll see a new U.S. dollar bull market and movement out of bonds,” said Michael Hartnett, chief investment strategist at B. of A. Merrill Lynch Global Research in the release.
The survey comes as the Fed gets ready to kick off a two-day policy meeting Tuesday, with fears the central bank could conclude the meeting by signaling a rate hike sooner than previously expected. Read: Eight keys to Fed’s September meeting.
Another key finding in the fund-manager survey was the stance on the European Central Bank and eurozone equities. Investors are increasing exposure to the region’s stock markets after the ECB at its September meeting again cut interest rates and said it would start buying asset-backed securities. A net 18% of the respondents are now overweight euro-area stocks, up from a net 13% a month ago. In addition, more of the panelists see the ECB embarking on a full-scale quantitative-easing program by the end of the year, with 42% believing in QE now, compared with 32% in August.
“While investors welcome the ECB’s actions, the region is still lacking its growth mojo. It will take time for growth to materialize from policy action, and there are no guarantees it will,” said Manish Kabra, European equity and quantitative strategist at Merrill Lynch.
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