Practical analysis for investment professionals
15 December 2011

Blood in the Streets? New Survey Reflects Financial Professionals’ Somber Outlook for 2012

Posted In: Drivers of Value
Global Market Sentiment Survey 2012

As John D. Rockefeller famously said, “The way to make money is to buy when blood is running in the streets.” A new survey of CFA charterholders (PDF), released today, reflects a level of pessimism that even the oil baron would appreciate: Three-quarters of respondents believe that the European sovereign debt crisis is unlikely to improve in 2012. Nearly 60% say that equities will underperform other asset classes next year. And more than 75% of CFA charterholders surveyed do not feel that there will be increased integrity in the financial markets in 2012. In fact, 22% feel that the integrity of global markets will be worse in the coming year, compared to just 13% of respondents who held that opinion last year.

The Global Market Sentiment Survey is an extension of the Financial Market Integrity Outlook, an annual survey that has been conducted by CFA Institute since 2007. Results were gathered in early November using an online survey, with more than 2,700 CFA charterholders worldwide responding. The results were reweighted to reflect the geographic distribution of CFA Institute members and have a margin of error of ±1.85%.

This year’s survey contains many strong opinions. Case in point: almost 40% of CFA Institute members feel that the primary issue yet to be addressed by either regulators or the industry is improved regulation and oversight of global systemic risk, up from just 23% in the last survey. “Slow starts at the national policy level and lack of progress in global coordination of systemic risk oversight are being outpaced by investor concerns about the potential for future systemic disruption,” CFA Institute reported.

The top three biggest risks to capital markets, according to members, are systemic disruptions, weak economic conditions, and political instability.

Interestingly, survey respondents tend to be more optimistic about the performance of their local economies than the global economy. In the Asia-Pacific region, for example, 78% of respondents feel that their local economies will either expand or stay the same in 2012, compared to 55% who feel similarly about the global economy. This 23 percentage-point margin is the widest in the survey.

Meanwhile, in the Americas region, 87% of CFA Institute members say that their local economies will expand or stay the same in 2012, as compared to 71% who hold that opinion for the global economy.

CFA Institute members based in Europe seem to be the most pessimistic, with 68% feeling that their local economies will either expand or stay the same, versus 72% for the global economy.


Local Market Outlook by Region

Local Market Outlook for 2012 by Country

Source: Global Market Sentiment Survey 2012.

 

Global Market Outlook by Region

Global Market Outlook for 2012 by Region

Source: Global Market Sentiment Survey 2012.

 


When it comes to employment opportunities for investment professionals, half of survey respondents believe that the outlook will remain the same in 2012. Asia-Pacific members are the most enthusiastic, however, with 23% saying that their prospects will be better next year. Only 8% of CFA Institute members in Europe, the Middle East, and Africa share this sentiment. In fact, more than half of respondents in those regions feel job opportunities will be worse.

Of course, the pendulum will swing… eventually. Most CFA Institute members believe that the impact of the global financial crisis on market trust and confidence will persist for another three to five years. But the number of members who believe that the impact will persist beyond the next five years dropped to 25% in this year’s survey, down modestly from 32% last year.

A glimmer of hope, perhaps?

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About the Author(s)
Jason Voss, CFA

Jason Voss, CFA, tirelessly focuses on improving the ability of investors to better serve end clients. He is the author of the Foreword Reviews Business Book of the Year Finalist, The Intuitive Investor and the CEO of Active Investment Management (AIM) Consulting. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he co-managed the Davis Appreciation and Income Fund to noteworthy returns. Voss holds a BA in economics and an MBA in finance and accounting from the University of Colorado.

Ethics Statement

My statement of ethics is very simple, really: I treat others as I would like to be treated. In my opinion, all systems of ethics distill to this simple statement. If you believe I have deviated from this standard, I would love to hear from you: jason@jasonapollovoss.com

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