The Bull at Merrill Lynch

Why Chief Global Investment Strategist David Bower

Every month, Merrill Lynch & Co. polls institutional fund managers around the world, asking them how they feel about the state of the stock market and what, if anything, they plan to buy. As the Federal Reserve has slashed interest rates, these managers, representing more than $200 billion in assets, have become increasingly bullish. David Bowers, Merrill's chief global strategist, spoke recently with Investment Advisor Editorial Director William Glasgall about the outlook for global markets.

David, why are managers getting more bullish? Monetary policy is going to be eased big-time. Deep down, the Fed means business. It's a very good time to be buying stocks, even if earnings momentum is going the wrong way. It's a textbook case of when to buy equities.

What are money managers thinking of buying? We think equities are the place to be, not bonds or cash, but 40% [of managers] are indecisive about sectors. Their only thing is to overweight banks and underweight telecom and technology.

How do you feel about tech stocks? My own view is that there is a potentially good trade in technology, but I would be very surprised if we end up with a capital spending-led [economic] recovery. It will be consumer-driven. If we get more from the Fed, the tech sector will rebound further, but it's too much to ask that we go back to 1999.

Turning to global stocks, what region do you like? Japan is going to be the big growth story of the next two years. It tends to do well when liquidity is rising. After you see more from the Fed and the European Central Bank in the second half of the year, people could be surprised by Japan.

As for Europe? Many people talk about Europe being immune from this [U.S.] slowdown. I don't believe that. And people are overweight in Europe already.

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