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Jan 14, 2016

‘New reality’ of US recession sees investors predicting below-consensus results

Corbin Perception says 70 percent of investors expect recession in US and poorer economic performance in China

Institutional investors are braced for disappointment in quarterly results as fourth quarter reporting starts and are expecting ‘muted’ 2016 guidance, according to a survey by Corbin Perception.

Corbin’s first quarter ‘Inside the Buy-side’ report says 57 percent of institutional investors surveyed now expect results to come in below consensus ‘as the reality of a looming US recession settles in after nine years of a bull market.’ The percentage represents a three-year high in terms of those expecting disappointing results.

More than 60 percent of investors surveyed say they expect organic performance to have worsened in the fourth quarter of last year while more than half predict that margin expansion and earnings growth will have deteriorated, according to the report.

Sixty-nine percent of investors describe themselves as neutral or bearish while only 8 percent describe themselves as bullish. Seventy percent say they expect a recession in the US within the next three years, with 40 percent predicting it will come in 2016.

‘We are entering a new reality the market was previously reluctant to accept,’ says Rebecca Corbin, founder of Corbin Perception. ‘Our research shows that institutional investors believe 2016 will be a muted year; a stock-picker’s market has therefore emerged.  

‘We will continue to see a flight to quality as investors place more and more emphasis on balance sheet strength and management teams that have a track record of executing through downturns.’

Over the next six months, 61 percent of investors say China’s economic performance will deteriorate and 84 percent predict disappointing earnings out of Asia for the latest quarter, according to the Corbin report.

Investors are most bullish on the technology and financials sectors, Corbin adds, and most pessimistic about the outlook for the materials, energy and industrials sectors.