There has been a widening of the equity sentiment gap between the euro-zone and the US, and the UK and Japan.
Market sentiment has split in two. For the euro-zone and the US, there was a correction that did not affect trends and equities are still favoured. In the UK and Japan, sentiment is moving towards favouring bonds
Markets are still driven by political risk and growth prospects. It looks like the two risks are working in the same direction this month.
It looks like political risk is taking a back seat to growth this month, continuing last month’s trend.
Last months’ move away from political risk continued this month for the US, the EU and Japan. The UK figures were stable or moving slightly in the opposite direction, reflecting worries over Brexit with the UK body politic in disarray.
When uncertainty hangs over the financial markets, indices tend to converge. That is true for net sentiment of equities
The end of 2018 saw expectations shift meaningfully in certain markets, and then pause. It also saw trends accelerate, then pause. For most of us, the pauses were welcome, because the shifts were related to broad market plans
Net dollar bearishness continues
At times we aim to find the mountains within the molehills of manager expectation shifts. In our defence, any curvature is worthy of recognition. Sometimes, changes (or lack thereof) come along that are worth diving into. In the prior survey, it was the four-month lack of change within the high sentiment toward US equity markets to rise that was significant. During the current period, hyperbole aside, change has come.
As often in high summer, storms – in the form of volatility – may be on the horizon
This month’s IPE Expectations Indicator poll sees no change in some areas, some change in others, and a continuation of a long-term trend, which is, in itself, both a change and not a change.
It would be an understatement to say the shine has left the US equity market, given this month’s manager expectation submissions. The month’s responses indicate movements across all asset categories, with a positive nod toward Europe, while those who predict change (for instance in the US and the UK) are seeing an erosion of confidence towards equity valuations.
The influx of pessimism in the prior survey has not carried over into this month
What does one expect to happen when positive sentiment declines across the board? What we know is that near universal sentiment movements do not happen often
Given the similarities between the February 2018 and February 2017 expectations surveys, it may be appropriate to wish everyone a ‘happy same year’
It would be an understatement to say the shine has left the US equity market, given this month’s manager expectation submissions
This survey has rarely found such consensus among asset managers as we see in this month’s survey. Virtually no manager expects euro-zone equities to fall or euro bond prices to rise
Just when some major themes seemed to be on pause, managers’ expectations crept into rarified territory, while in others themes in place since at least 2014 have gathered momentum. Whether valuation extremes are appropriate, managers believe they will continue.
Despite rising geopolitical tensions, there was no corresponding rise in negative sentiment in the most recent survey period. That does not mean there were no changes in sentiment trends; only that shifts were mostly slight
Investment managers’ expectations have been welcomingly accurate throughout the year. For example, positive sentiment toward European equities began to rise sharply near the end of 2016, followed by a roughly 20% rise in 2017. Additionally, expectations for dollar strength have been falling since January, and the dollar index (DXY) was down nearly 10% year-to-date through the recent survey period. What are managers’ views as we enter the second half of 2017?