Credit & Capital

Survey Sees Cautious Investor Sentiment

Institutional investors and analysts express concerns on geopolitical tensions and a slowing global economy.
Survey Sees Cautious Investor Sentiment

Institutional investment managers are concerned slowing global growth could hurt returns, but most do not think the U.S. is headed for a recession in the next twelve months, according to a survey from Corbin Advisors.

Corbin said “neutral” or “bearish” sentiment was 53%, up from 33% last quarter. Managers were also perceived to be more cautious than last quarter. Sixty-two percent of respondents thought the U.S. economy was losing momentum, but more than 70% did not think a recession was imminent.

“The economy is losing steam; tax reform effects are fading, trade concern is causing capex to slow down and margins are under pressure,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors.

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Corbin surveyed 84 institutional investors and sell-side analysts globally, representing more than $2.3 trillion in equity assets under management.

Nearly 80% of respondents thought U.S. gross domestic product for the year would remain in line with last year at plus or minus 2.5%.

But a solid majority of respondents indicated at least one rate cut by the Federal Reserve was likely. Corbin said 69% of investors expected the Fed Funds rate to be between 2.0% and 2.25% by year’s end.

Trade wars and geopolitical tensions topped the list of investor concerns. Sixty-five percent of respondents said they had high levels of concern over trade wars. Fifty-four percent said the trade war between China and the United States was “somewhat likely” to be resolved favorably over the next six months, but 70% of respondents were not concerned or only somewhat concerned about Brexit.

Forty-one percent of respondents said they thought second-quarter earnings would decrease sequentially. Forty-three percent said earnings would be worse than consensus, the highest level since 2015.

Eighty percent of respondents said they were placing more emphasis on balance-sheet strength than they did a year ago.

The survey was conducted between June 14 and June 28.