With the US election over, the opportunity of interpreting expectations of managers just prior to it is interesting. There were some interesting changes in the most recent period, but by far the most intriguing was the shifting of expectations to stability in equity markets without significant changes elsewhere. For a time when talk of market dangers seems to be continually rising, for managers not to be expressing the same concerns is notable.

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expectations dec 2016 key


% predicting rise (previous month) 14 (13)  7 (6)   10 (13) 13 (12)
% predicting stability (previous month) 31 (38)   62 (60)  47 (47) 48 (49)
% predicting fall (previous month) 55 (49)   31 (34)  43 (40) 39 (39)

Generally there was no rise in expectations that bond prices, in any denomination, should rise from managers. Expectations for euro bond prices were basically unchanged, with one slight tick moving from stability to price increases. Sterling bond price expectations shifted towards a decline, however the majority expects stability, a fact that has not changed in the last four months. Dollar bonds appear to be the only ones seen as at risk of decline, as those expecting a fall reached a high not seen since the beginning of the year.

bonds dec 2016


% predicting rise (previous month) 28 (31) 39 (35) 38 (34) 47 (48) 28 (30)
% predicting stability (previous month) 52 (43) 51 (51) 48 (45) 44 (38) 48 (43)
% predicting fall (previous month) 20 (26) 10 (14) 14 (21) 9 (14) 24 (27

There was consensus in expectations on global equity market prices in the survey period; numbers predicting a fall declined across the board. In the US, the proportion predicting declines fell to an eight-month low; in the euro-zone, a six-month low; in Asia, a 19-month low; and in the UK, a five-month low. The vast majority expect global equity market stability.

equities dec 2016

japan equities dec 2016


% predicting rise (previous month) 52 (45) 52 (50) 53 (52)
% predicting stability (previous month) 39 (43) 38 (32) 32 (35)
% predicting fall (previous month) 9 (12) 10 (18) 15 (13)

While the majority expects equities to stay put, more than 50% of managers expect the dollar to strengthen versus the yen, euro and sterling. This has only been the case twice in the last two years. The last time this occurred was immediately after the Brexit vote. So, managers expect a strong dollar, expect equity market stability and expect little change in bond markets, except for dollar bond prices to decline. Election result aside, it appears managers see the chances for a US Fed rate hike in December as rising.

currencies dec 2016

currencies 2 dec 2016

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Supporting documents

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