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IPE Expectations Indicator September 2017

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?

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ipe expectations indicator september 2017

 

Bonds

 $¥£
% predicting rise (previous month)12 (10) 6 (4)11 (8)12 (10)
% predicting stability (previous month)27 (25)65 (61)43 (40)21 (22)
% predicting fall (previous month)61 (65)29 (35)46 (52)67 (68)

There are growing positive expectations on bonds in most denominations, although the proportion of managers expecting bond prices to rise is all hovering near 10% or lower. However, negative sentiment towards dollar bonds appears to be bouncing off the floor set in February, and sterling bond sentiment has risen sharply for the second consecutive month. However, sentiment towards euro bonds is at its lowest level in over two years.

bonds september

bonds september 2

 

Equities

 USEuro-zoneJapanAsiaUK
% predicting rise (previous month)30 (30)78 (74)57 (65)54 (52)29 (27)
% predicting stability (previous month)47 (50)16 (20)33 (26)34 (38)52 (54)
% predicting fall (previous month)23 (20)6 (6)10 (9)12 (10)19 (19)

Despite asset managers’ prescience on European equities in this survey, ‘europhoria’ is levelling off. While the proportion of managers expecting gains from European equities rose to its highest level since early 2016, the proportion expecting losses has doubled from the prior survey. However, there is a mounting consensus however, is for a decline in US equities where the proportion of managers expecting gains is near a 12-month low, and those expecting a fall has risen to a 10-month high.

equities september

equities september 2

equities september 3

 

Currencies

 $/€$/¥$/£
% predicting rise (previous month)39 (34)41 (36)35 (36)
% predicting stability (previous month)38 (41)42 (46)48 (48)
% predicting fall (previous month)23 (25)17 (18)17 (16)

Belief in dollar strength continued to decline until August. September’s figure is slightly more optimistic, although still more pessimistic than the July survey. The dollar is still expected to be weakest versus the euro, although there was a shift of opinion from those expecting stability to an expectation of dollar strength against the single currency. While positive sentiment towards the dollar is at an all-time low, that is no longer being driven by sentiment in the dollar/euro pair, but rather by failing confidence in the dollar to the yen and sterling.

currency september

currency september 2

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