IPE Expectations Indicator: Positive euro-zone equity sentiment fades

There were sharp shifts in asset manager sentiment towards equities last month, according to IPE’s most recent Expectations Indicator.

Every month IPE polls asset managers on their six to 12-month views on regional equities, global bonds, and currency pairs.

The August Expectations Indicator survey, conducted between 18 June and 16 July, showed a notable deterioration in opinion about the outlook for euro-zone stocks, with the proportion of managers expecting prices to increase dropping from 73% to 62%. The shift was from positive to neutral, with few managers expecting prices to fall (6%).

Commenting on the results, Peter Laurelli, vice-president, global head of research at eVestment, said: “European equities have led the pack in terms of positive sentiment since the beginning of the year, but those positive expectations have now fallen by 30%.”

Positive sentiment towards equities in Japan and Asia continued to decline, the Expectations Indicator showed.

The proportion of managers expecting Asian equity prices to rise has fallen every month since April and last month it reached 44%, down from 59% the previous month.

There was a corresponding increase in the share of managers in the “predicting stability” camp, which grew from 29% to 44%.

Most managers were still bullish on Japanese equities but the proportion fell to 56% in the August Indicator from 65% for July. Most of those changing their minds switched to a neutral view.

“Tariffs and the end of quantitative easing does not seem to be a good combination for sentiment,” said Laurelli about the shifts across the three regions.

Expectations about bond price moves shifted the most with respect to dollar bonds and yen-denominated bonds.

There was a five percentage point increase in the share of managers with a bullish outlook on dollar bonds, although the biggest shift was in the proportion of those expecting prices to fall; down by eight percentage points.

This was significant, according to Laurelli’s reading of the results.

“[T]his was not a shift from neutral to positive, but across the board from negative to positive,” he said.

There was a shift from negative to neutral sentiment among managers with respect to yen-denominated bond prices. Last month 64% of managers indicated they were in the neutral camp, up from 57% the previous month.

The results were based on a poll of 86 managers.

Click here for the August 2018 Expectations Indicator