IPE Expectations Indicator November 2017
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.
|% predicting rise (previous month)||9 (10)||6 (4)||9 (12)||6 (10)|
|% predicting stability (previous month)||27 (30)||61 (65)||37 (44)||22 (26)|
|% predicting fall (previous month)||64 (60)||33 (31)||54 (44)||72 (64)|
Just when it seemed expectations of falling euro bond prices had softened, the difference between those expecting a rise versus those expecting a fall reached a new low. While the proportion predicting a rise is at a three-year low, it has been near this level before. What’s changed is the proportion predicting price declines. This figure rose from 64% to 72% this month, now five percentage points above its multi-year high. Basically, if euro bond prices were to rise it will be the second-biggest surprise to managers.
|% predicting rise (previous month)||36 (30)||83 (75)||66 (60)||56 (54)||31 (29)|
|% predicting stability (previous month)||43 (48)||12 (18)||25 (30)||33 (34)||53 (48)|
|% predicting fall (previous month)||21 (22)||5 (7)||9 (10)||11 (12)||16 (23)|
The biggest surprise to managers right now would be if euro-zone equities did not rise. The difference between expectations of rise and fall are just about back to their prior peaks seen in the summer of 2015. Expectations for Asia equities to rise bounced slightly after a one-month pause, and elsewhere the theme is also positive. In each regional segment, expectations for equity price declines fell, while expectations for gains rose. This has only happened once before, in December 2015. We can perhaps rest easy though, as at that time the cumulative expectations for equity gains were higher than they are now.
|% predicting rise (previous month)||32 (37)||35 (38)||35 (43)|
|% predicting stability (previous month)||36 (39)||43 (43)||42 (44)|
|% predicting fall (previous month)||32 (24)||22 (19)||23 (13)|
The final extreme of the current period is that the dollar has reached another multi-year low in terms of those expecting it to rise versus fall. The biggest factor in this new low for the dollar comes from its expected relationship with sterling. The proportion of managers expecting the dollar to weaken versus sterling rose ten percentage points to its second-highest level in more than three years. Its prior high was in responses provided by managers just before the vote in June 2016.