Strong first-quarter earnings, along with the end of the war in Iraq, boosted world stock markets in April, according to the Merrill Lynch Global Fund Managers’ Survey, released today. The U.S. dollar has not benefited, however, because fund managers remain concerned about the size of the U.S. current account and budget deficits, each of which could be as high as 5% of GDP in 2003.
"Strong first-quarter earnings on the part of U.S. companies played a greater role in the recent equities’ rally than we thought,” said David Bowers, chief investment strategist at Merrill Lynch. "The downside is that three quarters of fund managers believe the prime driver of corporate earnings growth remains cost-cutting, not top-line sales growth, and capital spending is on hold until debt has been reduced,” he added.
The survey polled 300 fund managers running a total of $732 billion, from May 1-8.