Schroders survey reveals increasing confidence in equity markets
At a recent Schroders Investment Conference in Athens1 , over 146 intermediary clients attended from more than 35 countries in Europe, the Middle East, Asia, the US and Latin America. They were surveyed on their outlook for several asset classes, as well as their views on interest rates and inflation over the medium term.
The results revealed that half (50 per cent) of those surveyed expect European equities to be the best performing asset class over the next twelve months, while a fifth (20 per cent) favour US equities. Despite this confidence in European markets, over half (53 per cent) stated that global equities would be their favourite asset class for investment in 2014.
Of those surveyed, 15 per cent expect emerging market equities to perform well over the next twelve months. While nearly three quarters (72 per cent) are currently neutral or underweight the asset class in client portfolios, over half (51 per cent) expect to increase exposure to emerging market equities over the next six months, suggesting that confidence may be returning after recent volatility.
The survey also reaffirms concerns over inflationary pressure, initially highlighted in the survey conducted at the same conference in February this year2. Almost three quarters (72 per cent) expect to be worrying more about inflation than deflation by 2018, however only 6 per cent are currently looking to hedge against inflation in client portfolios. Looking at interest rates, over four-fifths (81 per cent) expect US rates to have risen by the end of 2015, while 80 per cent do not expect interest rates in the Eurozone to increase until 2015 or later.
In a somewhat volatile market environment, there is a notable interest in products that could protect against this, with almost a third (32 per cent) of those surveyed looking for portfolios that could generate growth without the volatility of equity markets, and over a quarter (28 per cent) seeking to preserve wealth in volatile and unpredictable markets. A fifth (20 per cent) is looking for products that yield a sustainable income. This reaffirms the results from similar surveys conducted last year, which highlighted the continued search for income.
Carlo Trabattoni, Head of Pan European Intermediary Distribution and GFIG, said:
“Overall these results indicate an increased appetite for risk assets across the board, with those surveyed consistently favouring these asset classes. The increased expectations for performance of European equities are in keeping with the results seen in our survey from this time last year, which highlighted a possible turningpoint in investor sentiment. Despite recent political events in Europe, our equities team is seeing a wealth of opportunities to benefit from the perceived ‘recovery story’ for the European economy, which is consistent with the expectations that clients have for the asset class.
“The concern about inflation in the medium-term is consistent with previous surveys; however the fact that only 6 per cent are currently looking to hedge against inflation in client portfolios indicates that they have not yet started to take action against this concern. We are already seeing increasing client demand for outcomeoriented solutions, rather than benchmark driven products, that can provide income, growth or preserve wealth in volatile and unpredictable markets, and would expect to see more interest in products that can hedge against inflation as this becomes a more prominent issue.”
1 Schroders Investment Conference in Athens took place on 26th - 27th September 2013.
2 Schroders Investment Conference in London in February 2013, attended by over 125 intermediary clients from more than 30 countries in Europe, the Middle East and Latin America.
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