Portfolio positions worldwide are being rearranged as fund managers have raised their expectations for economic recovery, according to a recent Merrill Lynch survey cited by Dow Jones Business News.

There has been a large shift in the interest rate outlook, which is being fueled by the sell off of bonds and the 25-basis point cut in late June. According to the Merrill data, 47% of the 293 fund managers polled between July 3 and July 10 believe that short-term interest rates will be higher one year from now. Only 17% believed they would be lower. This is significantly different from the numbers in June, which held 35% on both sides of the question.

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