Europe Deflation Risk Seen by 74% in Global Investor Poll

by The Daily Lede


Europe Deflation Risk Seen by 74% in Global Investor Poll

Financial professionals are optimistic about the global economy, just not as fervent about it as they were at the start of the year. That’s the message from the latest Bloomberg Markets Global Investor Poll, which shows concern about risks ranging from the turmoil in Ukraine to the threat of deflation in Europe.

Forty percent of respondents in the survey of Bloomberg customers say the global economy is improving, another 43 percent say it’s stable, and only 12 percent say it’s deteriorating. Still, the enthusiasm has cooled: 59 percent thought the economy was improving in the last edition of the poll, in January; that was the highest reading since the world emerged from recession in 2009.

“I wouldn’t say investors are nervous, but they’re skeptical,” says Jack Ablin, who helps manage $66 billion in assets as chief investment officer of BMO Private Bank in Chicago.

The poll, conducted quarterly since late 2009, samples the opinions of traders, bankers and money managers who subscribe to the Bloomberg Professional service. Selzer & Co. of Des Moines, Iowa, collected responses from 594 customers from April 22 to 24. The poll has a margin of error of plus or minus 4 percentage points and is weighted to reflect the global distribution of Bloomberg users.

Poll respondents, however, are overwhelmingly concerned about deflation in the euro zone. About three-quarters of them say it’s a greater threat to the region than inflation. Some individual countries such as Portugal (PLCPYOY) have already experienced deflation this year, and the inflation rate in the 18-nation bloc as a whole was 0.7 percent in April, which is about a third of the European Central Bank target of just under 2 percent.

One reason to like European stocks is that they’re cheap, relatively speaking, according to Russ Koesterich, chief investment strategist at New York–based BlackRock Inc. (BLK), which manages $4.3 trillion in assets. “Most of the motivation is the valuation,” he says. Koesterich recognizes the growing caution the poll reveals. “People can still be overweight stocks and use the opportunity to raise a little cash, given the fact that there are some risks out there and stocks are no longer so cheap,” he says.

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