Investor sentiment has taken a nosedive, according to a recent survey conducted by Barclays, although that same survey found a number of contradictions, which indicates just how uncertain investors are. The rout across major asset classes has roiled not only the markets but also investors’ conviction.
Investor sentiment rocked by growth disappointments
In a report dated March 14, Barclays analysts Keith Parker and Sreekala Kochugovindan highlighted their recent survey of 585 investors from around the globe. In general, they found that investor sentiment has taken a huge hit from the turbulence during the first quarter. Most investors blamed the turmoil on disappointments in growth, although the Barclays team notes that global growth is “expected to surprise modestly to the upside in Q2.”
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Interestingly, Barclays found that 44% of respondents expect global growth to beat expectations in the second quarter, while 38% expect it to miss. As you can see from the above graph, this is a trend observed over the last three quarters. Regionally, investors see the U.S. as being the most likely to post a positive surprise and China as the most likely to miss. They added that fears about growth in China and further yuan devaluation have risen, as have other risks.
Deflation viewed as a big risk
The analysts said that 72% of investors believe deflation is seen as a larger risk to the markets even though commodities are likely to keep moving higher. In fact, they found that more than 70% of respondents have seen deflation risks as being greater than inflation risks over the last three quarters, with the proportion of investors expecting inflationary pressure nearing 60% last year while oil prices gained back some of their losses.
Oil price contradictions
Falling oil prices are seen by investors as a good thing for global growth but bad for risk assets. The bounce in oil prices didn’t change perceptions of inflation, although the Barclays team observed a doubling in the proportion of investors who expect commodities to outperform all other assets, bringing it to 18%.
They note that the results pertaining to oil prices contradict as the proportion of investors expecting a decline to positively impact global growth was about equal with those seeing a negative impact on risk assets and the proportion seeing no clear impact. Also interestingly, nearly 40% of investors expect energy to outperform other commodities, while just 29% expect Brent oil to be under $35 a barrel by the end of the second quarter.