A Hartford firm’s fresh quarterly research report on institutional investor sentiment finds overseas investors are more bearish than their North American counterparts.
Corbin Perception, an investor research and investor relations advisory firm, said its research found investor views cautious, as persistent low growth and uncertainty weigh on sentiment. Even prior to the “Brexit” vote by Britain to exit the European Union, 54 percent described equity valuations as overvalued and 46 percent reported an increase in portfolio cash holdings quarter over quarter.
However, bearish sentiment is still significantly down after peaking two quarters ago and not surprisingly, global investors are more bearish than their North American counterparts. Private equity investor David Knop said in the survey, “I am comfortable with domestic U.S. growth but uncomfortable with international credit markets, emerging markets and fiscal/geopolitical uncertainties.” The U.S. remains a bright spot while the Eurozone and Brazil registered the highest negative sentiment.
The poll is based on responses from 68 institutional investors globally managing over $1.8 trillion in assets. Corbin Perception has tracked investor sentiment on a quarterly basis since 2006.
Investor views on the technology sector weakened while bullish sentiment toward defensive sectors gained ground. Utilities saw the largest increase in bullish sentiment, its highest level since the first quarter of 2014. Consumer staples overtook technology as the top bullish sector.
The survey also found 79 percent anticipate earnings results to be in line to worse than Wall Street estimates. Survey findings also reflect a diverging sentiment trend between investment professionals and executives.
Greater than half of the survey group classify management tone as neutral to upbeat and at the same time describe their sentiment as slightly more guarded. Notably, the survey found, 31 percent of investors assert they are neutral to bullish, down from 41 percent last quarter and outright bears increased to 17 percent from just 2 percent previously.
“Companies are largely growing accustomed to managing in this challenging environment, which is likely why they are conveying a somewhat less cautious tone,” said Rebecca Corbin, founder and managing partner of Corbin Perception. “Some are further along than others in the cycle and have thus honed their organizational agility and operating effectiveness. We will continue to see this theme play out during second quarter earnings and beyond as companies strive to outperform in a volatile, low growth environment.”
Investors’ anticipation of a recession ebbed slightly from the previous quarter with 51 percent expecting economic contraction in 2017 or 2018. While last quarter’s perception that we are in the late stages of a prolonged recovery cycle has thawed somewhat, 77 percent continue to place emphasis on corporate balance sheets when evaluating investments.
Finally, regarding the contentious U.S. Presidential election, participants view Hillary Clinton as the best candidate for the markets while a Donald Trump presidency is seen as harmful to equities. A majority, 57 percent, report the election is having a negative effect on the financial markets though less than one-quarter are adjusting their asset allocation as a result.
