IPE Expectations Indicator April 2017
The latest manager poll has two main themes: markets are weak and levels of sentiment are extreme. Perhaps more than at any time in recent memory, the leading developed nations’ political actions are the source of immediate market instability.
|% predicting rise (previous month)||13 (13)||7 (8)||9 (9)||9 (11)|
|% predicting stability (previous month)||23 (18)||61 (59)||32 (35)||30 (29)|
|% predicting fall (previous month)||64 (69)||32 (33)||59 (56)||61 (60)|
The first wave of extreme sentiment is in the form of falling bond prices. More precisely, the cumulative difference across all denominations between those expecting respective bond prices to rise and those expecting them to fall has for the last three months been at levels not seen in almost three years. Of the four, euro bond prices are at their most extreme point, meaning at no time in the last three years has the consensus been greater that euro bond yields are set to rise.
|% predicting rise (previous month)||48 (50)||70 (65)||63 (60)||54 (48)||36 (31)|
|% predicting stability (previous month)||39 (38)||24 (27)||28 (30)||38 (40)||48 (47)|
|% predicting fall (previous month)||13 (12)||6 (8)||9 (10)||8 (12)||16 (22)|
In the US, it appears the post-election surge in expectations of rising equity prices has begun to fade, having fallen in each of the last two survey periods. This is against a backdrop of rising expectations for gains in euro-zone, Japanese, Asia, and UK equities. Here again, Europe is the leader with its rise/fall ratio well above 12-month highs.
|% predicting rise (previous month)||44 (56)||49 (52)||46 (48)|
|% predicting stability (previous month)||38 (30)||33 (29)||39 (34)|
|% predicting fall (previous month)||18 (14)||18 (19)||15 (18)|
We noted last month that the dollar appeared to be losing its lustre, a new trend in sentiment which has picked up yet another month of momentum. More managers say the US currency will fall relative to the euro than at any time in the last three years, and the same can almost be said towards the yen, except last month it was just one point higher. Only versus the pound are expectations for the dollar showing stability, which is an interesting word to use when referring to two nations in the midst of dramatic changes.