Corbin Advisors Finds Investors Continue to Expect Strong Growth and Remain Committed to Equities Despite Increasing Headwinds but Pressure is Mounting
- In-line with the 1Q18 survey, 45% expect results to be Better Than consensus estimates, while 55% continue to expect sequential improvemen
- Organic Growth, EPS and Cash Flow are largely expected to improve QoQ but at slightly muted levels
- Management tone remains elevated; 78% of respondents describe executives as Neutral to Bullish or Bullish, though positive investor sentiment has eroded slightly
- Nearly 80% express Moderate to High concern with trade wars and tariffs, which were also cited as the leading concerns for the second consecutive quarter; still, 61% express confidence in managements’ ability to largely offset costs
- Despite these headwinds, fewer than 50% classify U.S. equities as Overvalued, down from 57% sequentially and 70% report holding or buying equities, a slight uptick from the prior period
HARTFORD, Conn. – July 11, 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 87 institutional investors and sell-side analysts globally, representing over $1.0 trillion in assets under management.
While surveyed investors expect a strong 2Q18 performance based on elevated growth expectations and the ongoing impact of tax reform, tariffs and trade wars continue to serve as wild cards. Indeed, nearly 80% express concern about the potential for U.S.-driven levies to reverse global economic momentum and, when combined with inflation, have led to a high degree of uncertainty across the globe. While these headwinds have dampened the outlook – only 39% of survey respondents now expect U.S. economic improvement over the next six months, down from 59% last quarter – investors are keeping the faith in that 61% remain Somewhat to Very Confident in companies’ ability to largely offset rising input costs and/or tariff impacts through pricing actions and 70% report holding steady or buying equities, a slight uptick from last quarter.
“Headline noise could become more than noise, particularly on trade,” commented Fla Lewis, Chief Investment Officer at Weybosset Research & Management.
Still, near-term expectations remain strong and while 80% of investors believe we are Mid-to-Late to Late in the economic cycle, 55% believe we won’t peak until 2019 or 2020. To that end, fewer than 50% classify U.S. equities as Overvalued, a decrease from 57% sequentially, and 35% see room for expansion, compared to 22% last quarter.
“Heading into the second quarter earnings cycle, expectations for growth remain strong but pressure is mounting as headline noise around tariffs and trade wars will likely become a reality in the second half of the year,” commented Rebecca Corbin, Founder and CEO of Corbin Advisors.
“Companies are stronger and better positioned than ever and while the majority of our survey respondents are confident that management teams will be able to largely offset headwinds via pricing actions, it is increasingly becoming more challenging to grow profitably. As the cycle stretches on, we have identified some gradual erosion in sentiment but positive views remain elevated, indicating more room to run notwithstanding some exogenous shock, such as an all-out trade war,” added Ms. Corbin.
Pronounced headwinds have rippled across the globe as all regions saw pullbacks in positive sentiment. The Eurozone, Brazil and U.S. saw the most notable decreases, marking the first time since 3Q16 that neither the Eurozone nor U.S. were designated as the top two most likely to expand. India and Southeast Asia are now the top picks for economic improvement over the next six months.
As for sector views, Technology garnered the highest level of optimism for the second consecutive quarter and Energy and Consumer Discretionary saw the largest increases in bulls due to rising oil prices and increasing confidence, respectively. For the seventh consecutive quarter, Utilities and REITs garnered the most bearish views, while Telecom saw the largest spike in negative sentiment.
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.
About Corbin Advisors
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.
To learn more about us and our impact, visit CorbinAdvisors.com.
Bronwyn Swanson, 203-283-7997