Corbin Advisors Research Finds Deteriorating Institutional Investor Sentiment amidst Worsening Macro, Decelerating Organic Growth and Uncertain Political Backdrop; Contrasts with All Time U.S. Equity Market Highs and Improving Executive Tone
- 54% of surveyed investors classified equity valuations as overvalued ahead of Brexit and 46% reported an increase in portfolio cash holdings from last quarter
- Defensive sectors, specifically Consumer Staples, Health Care and Utilities grew in relative bullishness
- Despite perception of worsening macro and decelerating organic growth, near term stability expected in North America earnings
- More positive executive tone is diverging from increasingly cautious investor sentiment; management confidence in operating in low-growth environment increasing
- With the U.S. presidential election taking center stage, a stunning 80% of investors see Donald Trump as having a negative or very negative impact on the markets if elected; compared to only 32% for Hillary
HARTFORD, Conn. – July 15, 2016 – Corbin Advisors, a leading investor research and investor relations (IR) advisory firm, today released its quarterly research report, Inside The Buy-side®, a global survey that captures trends in institutional investor sentiment heading into the earnings season. The poll is based on responses from 68 institutional investors globally managing over $1.8 trillion in assets.
Our survey finds investor views cautious, as persistent low growth and uncertainty weigh on sentiment. Even prior to the Brexit vote, 54% described equity valuations as overvalued and 46% reported an increase in portfolio cash holdings quarter over quarter.
However, bearish sentiment is still significantly down after peaking two quarters ago and not surprisingly, global investors are more bearish than their North America counterparts. Private equity investor David Knop asserts, “I am comfortable with domestic U.S. growth but uncomfortable with international credit markets, emerging markets and fiscal/geopolitical uncertainties.” The U.S. remains a bright spot while the Eurozone and Brazil registered the highest negative sentiment.
Further underscoring fundamental concern around growth, investor views on the Technology sector weakened while bullish sentiment toward defensive sectors gained ground. Utilities saw the largest increase in bullish sentiment, its highest level since 1Q14. Consumer Staples overtook Technology as the top bullish sector.
Continuing, 79% anticipate earnings results to be in line to worse than Street estimates. “Analysts are not overly positive, thus consensus should be in line with actual earnings,” noted Kim Forrest, Portfolio Manager at Fort Pitt Capital Group.
Survey findings also reflect a diverging sentiment trend between investment professionals and executives. Greater than half of the survey group classify management tone as neutral to upbeat and at the same time describe their sentiment as slightly more guarded. Notably, 31% of investors assert they are neutral to bullish, down from 41% last quarter and outright bears increased to 17% from just 2% previously.
“Companies are largely growing accustomed to managing in this challenging environment, which is likely why they are conveying a somewhat less cautious tone,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors. “Some are further along than others in the cycle and have thus honed their organizational agility and operating effectiveness. We will continue to see this theme play out during 2Q earnings and beyond as companies strive to outperform in a volatile, low growth environment.”
Investors’ anticipation of a recession ebbed slightly from the previous quarter with 51% expecting economic contraction in 2017 or 2018. While last quarter’s perception that we are in the late stages of a prolonged recovery cycle has thawed somewhat, 77% continue to place emphasis on corporate balance sheets when evaluating investments.
Finally, regarding the contentious U.S. Presidential election, participants view Hillary Clinton as the best candidate for the markets while a Donald Trump presidency is seen as harmful to equities. A majority, 57%, report the election is having a negative effect on the financial markets though less than one-quarter are adjusting their asset allocation as a result. “The outcome of the U.S. Presidential race is not sufficiently priced in yet due to other imminent global matters, such as Brexit,” noted Carlo Besenius, CEO of Creative Global Investments.
Since 2006, Corbin Advisors has tracked investor sentiment on a quarterly basis. Inside The Buy-side® and other research on real-time investor sentiment, IR best practices and case studies are available at CorbinAdvisors.com.
About Corbin Advisors
We are Corbin Advisors, a leading investor research and investor relations advisory firm that specializes in shareholder value creation.
We leverage our broad company and industry experience, knowledge of best practices and benchmarking capabilities to provide research-driven counsel that enables our clients, publicly-traded companies across diverse industries, to positively differentiate their company in the market. We bring a unique perspective to our engagements, one that is based on a proven methodology and customized approach.
Our industry-leading research, Inside The Buy-side®, is covered by news affiliates globally and regularly featured on CNBC.
Bronwyn Swanson, 203-283-7997