Global investors show signs of anxiety
US stocks rose to record highs at the end of last year – with the Dow and S&P 500 both breaking records in December – but buy-side sentiment in 2015 is kicking off on a more cautious note, according to the latest research from Corbin Perception, the IR research and advisory firm.
Corbin’s regular survey of institutional investors, which this round includes 70 respondents from around the world, finds the number of respondents calling themselves ‘cautiously optimistic’ or ‘bullish’ has fallen to 48 percent from 77 percent last quarter.
In addition, 37 percent of investors now have a ‘neutral’ or ‘bearish’ outlook, compared with 17 percent three months ago. Asia-based respondents account for half of that 37 percent, notes Corbin.
Institutional investors also demonstrate an increased nervousness over company valuations, although they still broadly believe stock prices can maintain their current levels. In the latest survey, 70 percent state that current market valuations are sustainable, a drop from 78 percent in the previous quarter.
Current valuations are being supported by global GDP growth, plus low interest rates and inflation, according to comments made by respondents. ‘As long as the US economy improves and the rest of the world stabilizes, the valuations are fine,’ says one growth investor based in North America.
Several respondents highlight the role interest rate decisions will play in determining how they view valuations in 2015. On that topic, two fifths of respondents – the highest proportion – expect the Fed to hike rates in the second quarter of this year, while 29 percent predict a rise in Q3. Just over a fifth (21 percent) don’t expect a rise until 2016.
‘The uptick in bearish sentiment is notable, as it implies increased concern as to whether future earnings growth can support today’s lofty valuations,’ says Rebecca Corbin, founder and managing partner of Corbin Perception, in a statement.