Weekly Market Review
In this recap, we summarize market performance and market moving news from the prior week.
Investment Manager Pulse
Oct 17, 2022
This quarterly survey of senior investment professionals gauges managers’ views on the economy, financial markets, and risks to their portfolios.
SIRG’s Investment Manager Pulse, Where Professional Investors Are Finding Opportunities, gauges managers’ views on the economy, financial markets, and risks to their portfolios.
SENTIMENT TOWARDS EQUITY MARKETS CONTINUES TO SLIDE WITH HIGHER RATES AND RECESSION FEARS
Key Takeaways from the Strategic Investment Research Group’s Quarterly Investment Manager Survey:
- Economic growth expectations continue to be revised lower. The combined impact of increasingly hawkish central banks and consumers squeezed by the impact of rising prices has led to a continuation of downward revisions to managers’ GDP estimates. The median estimate for global GDP growth over the next year fell sharply from 3.0% to 2.0%. Expectations for US growth declined from 2.0% to 1.2%. Growth rates are expected to be negative in the Eurozone (-0.7%) and the UK (-1.0%).
- Investment managers believe that inflation has peaked, but it will take a while to get to the Fed’s 2% target. Eighty-four percent of managers think that we have seen the peak of headline CPI in the US. Sixty-nine percent believe that core inflation has also peaked. However, most (76%) don’t see inflation as measured by core PCE, the Fed’s preferred gauge, reaching 2% until at least 2024.
- Sentiment towards equities hit a new record low. Only 17% of managers are bullish on US equities (down from 26% last quarter) vs. 43% who are bearish (up from 32%). Results are similar for international equities, where 17% are bullish (down from 24% last quarter) vs. 45% who are bearish (up sharply from 24%).
- Within equity, managers favor high-quality companies. Eighty percent expect high-quality companies to outperform the broad market. Also 71% expect dividend growers, which also tend to be companies with very stable business models, to outperform. Only 27% are bullish on growth stocks and 12% on momentum.
- Bond investors continue to get more defensive. Specifically, they have become less negative on Treasuries over the past six months as rates have risen significantly. Only 36% are bearish on the sector (down from 84% in March), while 16% are bullish (up from 4% in March). Also, despite wider credit spreads, managers remain cautious on credit. Eighty-three percent expect spreads to be wider a year from now, up from 72% last quarter.
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2022 Global Risk Report: Tail Risks
PGIM surveyed institutional investors to identify tail risks with a perceived low likelihood of occurrence, but high impact and a low level of preparedness.
This report is produced by the Strategic Investment Research Group (SIRG), a unit of PGIM Investments LLC, and a research unit of Prudential Financial. SIRG provides research, analysis, and due diligence on investment management firms and the vehicles and strategies they offer.
The SIRG Investment Manager Survey collects the insights and opinions of senior investment professionals from across the asset management industry.
This report provides an in-depth analysis of their collective views on the economy, financial markets, and other relevant issues affecting the investment community.
A total of 61 asset management firms responded and are included in this analysis. Data was collected between May 25 and September 15, 2022.
GDP - The monetary value of all the finished goods and services produced within a country’s borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well. GDP includes all of private and public consumption, government outlays, investments and exports, minus imports that occur within a defined territory.
Consumer Price Index (CPI) ex-Food & Energy measures the movement of prices for all items less food and energy, often referred to as Core CPI, excluding the two most volatile components of the overall CPI.
Core PCE Inflation - A measure of price changes in consumer goods and services similar to the consumer price index (CPI). Personal consumption expenditures consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, non-durables, and services, but does not include volatile food and energy prices.
The information contained herein has been obtained from sources that Prudential Financial believes to be reliable. Prudential Financial does not guarantee the accuracy or completeness of data received from outside sources, including investment managers.
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Investing involves risks. Some investments have more risk than others. The investment return and principal value will fluctuate and the investment, when sold, may be worth more or less than the original cost and it is possible to lose money. Past performance is not a guarantee of future results. Since no one manager/investment program is suitable for all types of investors, this material is provided for informational purposes only. Fixed income investments are subject to interest rate risk, where their value will decline as interest rates rise.
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