Cheer Up, Gang. It Might Never Happen.

Cheer Up, Gang. It Might Never Happen.

over 1 year ago5 mins

  • Your outlook on the global economy and company profits are at a new low, and you’re all more pessimistic about stocks and crypto too.

  • In fact, a lot more of you are sitting in cash or inflation-hedges like real estate and gold than before.

  • Given this backdrop, you might want to look at Chinese stocks, or – if you want to stay closer to home – consumer staples, utilities, and other inflation-proof assets

Your outlook on the global economy and company profits are at a new low, and you’re all more pessimistic about stocks and crypto too.

In fact, a lot more of you are sitting in cash or inflation-hedges like real estate and gold than before.

Given this backdrop, you might want to look at Chinese stocks, or – if you want to stay closer to home – consumer staples, utilities, and other inflation-proof assets

Mentioned in story

A lot’s changed since March, when we rolled out our last Modern Investor Survey. That much was clear from June’s survey, which showed that your outlook for the economy, the financial markets, and the risks facing both of them have all shifted quite dramatically. And one thing stands out among the 171 people who took part: you’re all making shrewd moves in anticipation of a bleak year to come.

How are Finimizers feeling about the global economy?

We’ve been running this survey for over a year now, and this is the first time that more of you think the economy will be in a worse place a year from now than think it’ll be in a better place – a net 22%, to be precise (note that we use “net” percentages so we can compare one survey against another).

Net proportion of respondents saying inflation, economic growth, or company profits will be higher in 12 months.
Net proportion of respondents saying inflation, economic growth, or company profits will be higher in 12 months.

Not that this came as much of a surprise: it’s very much in keeping with the bearish trend in sentiment we’ve been seeing ever since June last year. It’s also in keeping with your expectations for company profits, which makes sense given that the two tend to go hand in hand.

There is one bright spot, mind you: more of you think inflation will be lower than think it will be higher in 12 months’ time. That might be because there’s already talk from economists about inflation having peaked, and because central banks around the world have finally started getting aggressive with interest rate hikes. This nod from our community suggests you think it’ll work.

How are Finimizers feeling about stocks and crypto?

That same bearish sentiment is very much evident when we look at your view on one-time Finimizer-favorite bitcoin: just a net 10% of you are expecting the cryptocurrency to be higher 12 months from now – a plunge from March’s 44% and the second-straight quarter the metric has fallen.

Net proportion of respondents saying saying stocks and bitcoin will be higher in 12 months
Net proportion of respondents saying saying stocks and bitcoin will be higher in 12 months

It’s not hard to see why: bitcoin has fallen almost 60% since we conducted March's survey, and there aren’t many signs of that turning around anytime soon. And while you’re not feeling quite so down on stocks, they’re in much the same boat, with only a net 14% of you saying stocks will be higher this time next year – the lowest number we’ve ever recorded.

Still, if there’s one sliver of hope, it’s that more of you still think they’ll both be up in 12 months’ time.

What have Finimizers seen investors buying?

Given this backdrop, it’s not surprising that your portfolios have changed quite a bit since we last checked in. Crypto’s not the most crowded trade anymore, knocked off the top spot for the very first time by stocks. In fact, when asked which assets you’re seeing other investors back, just 13% of you said crypto – around half the 25% in March and well short of the 46% in December.

Responses to “Which assets do you see most investors buying at the moment?”
Responses to “Which assets do you see most investors buying at the moment?”

Something else interesting: cash has made it into the top three most-crowded investments. That’s understandable given the recent market downturn, and crafty Finimizers could just be biding their time before they nab a few bargains. Of course, high inflation will slowly whittle away that cash pile over the long term, so you won’t want to hold it for too long.

The fact that more of you are choosing more inflation-proof investments like real estate, gold, and commodities – all of which tend to hold their value over time – is also an encouraging sign that you know what you’re doing in these choppy times. We’d expect no less.

What risks do Finimizers see on the horizon?

There are a couple of risks worth highlighting here. First, the fear of recession seems to be front and center in all your minds, with nearly three times as many of you citing it as a risk as last time around. That lines up with what economists are seeing too, with Goldman Sachs warning in recent weeks that the risk of the US entering a recession is now 30% – double their previous forecast.

Responses to “What’s the biggest risk for markets at the moment?”
Responses to “What’s the biggest risk for markets at the moment?”

Second, inflation has now stolen the top spot away from the war in Ukraine. That makes sense, seeing as virtually all the risks listed are very much intertwined with record global inflation. After all, the war and supply chain shortages just pushed prices even higher, while interest rates hikes – and in turn recession fears – are all aiming to get it back under control.

What’s the opportunity here?

There’s a lot of nervousness out there right now, which is more than evident from the results of our survey.

But it brings to mind Warren Buffett’s old mantra: “Be fearful when others are greedy and be greedy when others are fearful”. With that in mind, now could be a good time to think about getting into the market. Of course, timing the market is tough, so dollar-cost averaging – investing a predefined amount at fixed intervals – could help you reduce the impact of any market swings, without missing a sudden market recovery.

As for what to invest in, there are a few good options. First off, it could be worth looking outside Western markets and toward China. After all, the People’s Republic is finally coming out of lockdown, halting crackdowns on its once-booming tech sector, and planning to implement support measures to boost the economy. Even better, Chinese companies are trading at much lower market valuations than their Western peers. That might be why Chinese stocks are defying the recent global market selloff, and why they’re on track for their biggest monthly gain since 2020.

Of course, investing in China isn’t without its risks: the government’s hardline zero-Covid stance isn’t going anywhere, after all. So if you want something closer to home, look at companies that can pass on cost increases to customers without losing business, such as consumer staples or utilities. Other inflation hedges to avoid sitting in cash could be worth considering too: think inflation-linked bonds (TIPS), commodities, real estate, and even traditional safe havens like gold.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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