Half of the institutional investors surveyed by Merrill Lynch this month are bullish on the global economy, the first time since March that respondents have indicated they're expecting a stronger world economy, according to a Merrill Lynch news release. Only 11% of the 288 investors polled earlier this month said they believe corporate profits will deteriorate over the next year, compared with 33% from July.
Roughly 50% of the respondents also said companies should increase spending on capital expenditures, while only 3% of investors said spending should be decreased. Fewer investors this month said they want corporations to return cash to shareholders.
"Investors are increasingly polarized between those who want to see cash returned to shareholders and those who want to see it injected back into businesses," David Bowers, chief global investment strategist at Merrill Lynch, said in the news release. "If higher investment spending gains the upper hand, this could lay the foundation for a more enduring economic recovery."
Expectations of growth and recovery are connected to a belief that interest rates will continue to rise over the coming year. In the latest Merrill survey, 78% of investors said they expect short-term interest rates to rise, an increase from the 61% who held such expectations in July. Also, 71% see an increase in long-term rates as well, up from 57% in last month's survey.