After a week in which the US Federal Reserve Board cut its key interest rate to just 1% but Washington had to admit that American output was officially falling, the world’s fund managers are betting that the New York stock market will be the first to recover.

Merrill Lynch, the investment arm of Bank of America, found US fund managers virtually accepting that there will be a deep and prolonged recession.

“In our view it is too soon to say we have reached a bottom in equity markets given the current financial-market turmoil,” said Sheryl King, senior US economist at Merrill.

However, nearly half the 183 managers surveyed said that American shares were where they would want their money over the next 12 months as recovery begins.

The first big obstacle should be removed on Tuesday night, when either John McCain or Barack Obama celebrates becoming the 44th president of the United States.

Assuming there is a clear winner, stock markets will be relieved to know who will be making the big decisions for the next four years.

John Benson of Marsico Capital Management in Denver, Colorado, which advises Gartmore’s US funds, said:

“The market will like any removal of uncertainty in the present climate. The election result will be positive in the short term.”

Analysts, though, are divided over whether this alone will be enough to spark the long-awaited upturn in share prices. Wednesday morning’s euphoria is likely to be replaced by two big worries.

First, the new man takes office on January 20 and, however friendly the handover, no powers can legally be transferred until then.

While Benson is confident that perceptions will change, investors face a two-month hiatus in Washington that could send markets into freefall.

Second, the winner’s political agenda will have to be set aside while he copes with what is being increasingly seen as the most serious economic crisis since the 1930s.

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