ManageMent sentiMent survey
The contagion spreads
For most of the year, sentiment on the emerging sectors and Asia have managed
to remain in positive territory, but even they are now looking less attractive and
only the US remains in favour. Meanwhile, a look at the equity indices for October
shows the effects of the economic turmoil the global economy finds itself in
The pattern is clear –
for the month of
October, the equity
indices fell sharply,
while the sentiment
stabilised. Bond returns
also dropped slightly
but sentiment rose
fairly sharply.
It looks like we are
in a peculiar stage in this downturn: most of
the developed markets in the world are in
recession, even if the numbers have not come
through yet. Recessions tend to last a year or
two and markets always pre-empt the recovery.
Only the braver fund managers are starting
UK
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
100
50
-50
-100
Nov ’07
100
0
50
-50
-100
Nov ’07
100
50
-50
0
0
-100
Nov ’07
UK GOVERNMENT BONDS
Emerging markets
Finally, emerging has started to fall into the same sentiment
pit as the developed markets. In terms of actual
performance, that is not quite true – BRIC plummeted
in October but the global emerging markets stayed
level. Not for long.
BRIC EQUITY
It shows how over-
20
valued BRIC had
become (especially
10
Russia) but that it could
take a hit. It almost
0
broke the 20% limit that
-10 we put on our graphs,
thinking markets could
-20 never be that volatile in
Oct ’08 just one month. It is the
biggest every drop
EMERGING MARKET EQUITY
since we started the
20
database in July 2004.
Still, sentiment from
10
the managers is only
0 just less than zero: there
is a lot of fence-sitting
-10 going on as managers,
like the rest of us inves-
-20 tors, wait to see what
Oct ’08 will happen.
-20
Oct ’08
20
10
0
-10
Citi UK Govt Bond Idx (discrete) %
MSCI BRIC (discrete) %
S&P/IFCI Composite (discrete) %
Positive
Neutral
Negative
100
50
-50
-100
Nov ’07
Oct ’08
to call buy signals. In UK equities, for instance,
nine managers said that the index would be up
in a year, six said it would be down, while ten
are neutral.
As you would expect, the uptick in sentiment
for government bonds mostly comes
Positive
Neutral
Negative
100
50
-50
0
0
-100
Nov ’07
UK EQUITY
UK CORPORATE BONDS
30 PORTFOLIO ADVISER [www.portfolio-adviser.com] DEcEmbER 2008
Global
-20
Oct ’08
International bonds, from the point of view of a UK-oriented fund manager,
have been a no-go area for the past three years. In a relentless
equity bull market, this is unsurprising. The first time sentiment moved
above zero since July 2004 was last December and even that was barely
positive - six managers liked them, five managers did not, the rest were
neutral. But now it looks like an upward trend.
But this is not the
GLOBAL PROPERTY
case for global proper-
100
20
ty which, you can see,
has done only slightly
50
10
better than UK
property.
0
0
It is seen as toxic
waste, and the volatili-
-50
-10
ty in the index recently
has only added to that -100
-20
feeling.
Nov ’07
Oct ’08
20
10
0
-10
-20
20
10
0
-10
FTSE All-Share (discrete) %
Citi UK Corp Bond Idx (discrete) %
PA Manager Sentiment Survey
Comparing the 12-month forward
outlook of 25 global fund groups
with current discrete monthly
index returns
Positive
Neutral
Negative
100
50
-50
In association with
-100
Nov ’07
Oct ’08
from those who are negative on equities – only
three out of the nine positives are also positive
on UK equities.
Property, with its long lead terms and slow
movement, is hated more than ever: there is
not a single manager who is positive.
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
100
-50
0
50
0
-100
Nov ’07
100
50
-50
0
-100
Nov ’07
UK SMALLER COS EQUITY
UK PROPERTY
INTERNATIONAL BONDS
-20
Oct ’08
-20
Oct ’08
20
10
0
-10
-20
20
10
0
-10
20
10
0
-10
FTSE Small Cap (discrete) %
FE UK Property (discrete) %
Citi Wld Govt Bond Idx (discrete) %
MSCI World Real Est (discrete) %
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.