Corbin Advisors Finds Strong Economic Growth and Earnings Momentum Continue but Is It Enough to Overcome Trade War Reality?
- On the heels of last quarter’s results, more than half describe their confidence level in the global economy as Relatively High or High
- 60% expect sequential earnings improvement, while more than 90% forecast results will be In Line to Better Than consensus
- Organic growth and cash flow still expected to improve QoQ but at slightly muted levels, while margin outlooks temper somewhat amid rising input costs
- Ahead of Trump’s tariff announcement and China’s retaliation, trade wars were at the forefront of surveyed investors’ minds with 74% expressing Moderate to High concern about the potential to derail growth momentum
- Despite concerns surrounding inflation, labor shortages and trade wars, investor sentiment registered only slightly below last quarter’s highest positive level
- Technology sees highest sentiment in a year, exacerbating the sector’s recent sell-off, while Utilities and REITs continue to remain out of favor
HARTFORD, Conn. – April 5, 2018 – Corbin Advisors, a specialized investor relations (IR) advisory firm, today released its quarterly Inside The Buy-side® Earnings Primer report, which captures trends in institutional investor sentiment. The survey is based on responses from 75 institutional investors and sell-side analysts globally, representing over $2.2 trillion in assets under management.
Surveyed investors expect growth momentum to continue, driven by tax reform and strong 2018 guidance outlooks, which 90% note were In Line to Better Than expected, though significant uncertainty surrounding U.S.-China relations looms large. Ahead of Trump’s tariff announcement and China’s retaliation, trade wars were at the forefront of surveyed investors’ minds with 74% expressing concern about the potential to reverse global economic momentum. This, along with ongoing concern regarding rising input costs and interest rates tempered last quarter’s record optimism somewhat, though the majority expect continued expansion in organic growth, EPS and cash flow.
“My top concerns are trade wars, interest rates and irrational exuberance,” commented Malcom Polley, Chief Investment Officer at Stewart Capital Advisors. Dan Denbow, Portfolio Manager at USAA Investment Management added, “My sentiment is neutral to bearish, I am worried about inflation and margins. Every management team we meet with discusses costs, especially labor.”
At the time of the survey, nearly 60% considered U.S. equities Overvalued, with only 23% expecting 2018 valuations to expand, a significant decrease from 40% last quarter. For Europe and Asia, equities are generally seen as more compelling with room to expand.
“Following last quarter’s all-time high expectations and the most upbeat management tone registered since September 2014, driven by continued growth momentum, our research identified an inflection downward from these record levels, due in large part to trade war uncertainty,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors. “Still, expectations for continued economic growth, as well as a strong first quarter and full year, remain intact heading into earnings season. Management tone and outlooks on upcoming calls will be a critical factor in market behavior going forward, as investors look for decisiveness on the potential impact of trade, taxes and inflation,” added Ms. Corbin.
Despite 52% of surveyed investors purporting Relatively High or High confidence levels in the global economy, all geographic regions saw a slight pullback in optimism with Japan and Mexico experiencing the largest declines. Still, the Eurozone and U.S. remain the top picks for economic improvement over the next six months.
As for sector views, bullish sentiment receded across the board though Technology saw its highest level of support in over a year, with the high level of optimism likely exacerbating the recent sector sell-off. For the sixth quarter in a row, Utilities and REITs garnered the lion’s share of downbeat sentiment, while Industrials witnessed the most significant negative shift amid fewer bulls and increased bears.
Since 2006, Corbin Advisors has tracked investor sentiment on a quarterly basis. Access Inside The Buy-side® and other research on real-time investor sentiment, IR best practices and case studies at CorbinAdvisors.com.
Corbin Advisors is a specialized investor relations (IR) advisory firm that partners with C-suite and IR executives to drive long-term shareholder value. We bring third-party objectivity as well as deep best practice knowledge and collaborate with our clients to execute sound, effective investor communication and engagement strategies. Our comprehensive services include perception studies, investor targeting and marketing, investor presentations, investor days, specialized research, and retainer and event-driven consulting.
Inside the Buy-side®, our industry-leading research publication, is covered by news affiliates globally and regularly featured on CNBC.
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Bronwyn Swanson, 203-283-7997