Surveys
Investors: Expect Lacklustre Returns Ahead - Survey

Perhaps unsurprisingly, a poll of a global firm's executives, strategists and economists finds that they think investors cannot expect more than low returns in the next 12 months.
Investors taking a global view should expect “lacklustre”
performance over the next six to 12 months as worries about
US-China trade relations and a fractious UK exit from the
European Union help weigh on sentiment, a new study said.
A report from the Natixis Investment Institute, part of
Paris-listed investment house Natixis, surveyed 17 chief
executives, market strategists and economists in its businesses
about what investors might expect in the second half of this
year.
The UK is preparing to leave the EU by 31 October, although media
and market speculation continues over whether prime minister
Boris Johnson’s ruling Conservatives will be able to leave
without a deal in the face of parliamentary opposition.
Separately, rising protectionism between the US and China,
worries about Hong Kong’s political unrest, and a jolt this week
from Argentina, have rattled investors. (Fieldwork for the
Natixis study was completed in July, prior to the latest
developments in Argentina and Hong Kong.)
Few of the persons surveyed see any upside to the UK’s Brexit
process. Although some hope that central banks might loosen
monetary policy and drive a growth rebound, many of the
respondents think this will be ineffective. Those surveyed did
not foresee accelerating global growth or equity earnings in the
next six to twelve months, Natixis said.
“The survey results clearly show that, in aggregate, our
respondents don’t see a lot of positive market catalysts on the
horizon – nor do they see a recessionary worst-case scenario as
very likely in the near term. It’s a kind of a ‘muddle through’
outlook,” Esty Dwek, head of global market strategy, dynamic
solutions, Natixis Investment Managers, said.
“After a dismal end to 2018, equities and bonds rallied in the
first half of 2019. Performance to date has been driven largely
by the hopes of new rounds of central bank easing but, as what
the market hoped for comes closer to reality, market strategists
across the Natixis family find little to get excited about.
Perhaps the best news is that despite projections for lacklustre
performance, they are not calling for a dramatic retreat from the
impressive gains. After the stinging losses in Q4 2018, maybe
‘meh’ is something to be excited about after all,” Dwek
said.
Asset classes
With a strong expectation of Fed rate cuts on the horizon,
Natixis strategists are most bullish on US Sovereign bonds,
followed by emerging market equities, global real estate
investment trusts and emerging market bonds of all types (hard
currency, local currency, and corporate).
“The common thread running through these bullish forecasts is
accommodative central bank policy and ample global liquidity. In
turn, respondents are most bearish on cryptocurrencies, UK
stocks, US high yield and bank loans,” Natixis said.
On equities, Natixis strategists predict thin equity returns in
the US and eurozone over the next six to twelve months. Overall,
the outlook on equities is balanced and no strategists forecast a
bear market (-20 per cent) or even a market correction (-10 per
cent) in this time frame.
Turning to fixed income, respondents to the survey said that
central banks continue to be the focus, expecting looser monetary
policy from the US Federal Reserve and the European Central Bank.
On average, the strategists predict that the Fed will ease rates
back by 50 basis points by the year end. In Europe, respondents
see further easing from the ECB and anticipate a 5–10 bps cut in
the overnight deposit rate. Consensus is not as strong on ECB
cuts, as almost half (eight out of 17) forecast no change to the
overnight deposit rate.
With currencies, most respondents (10 out of 17) predict that
markets will become more volatile and none of them expect that to
decline. Finally, on gold, respondents predict that the metal
will fall in price slightly. Most expect a fall in crude oil by
about 5 per cent over the forecast period.