Every quarter, Scopic Research monitors the sentiment of multi asset teams towards different growth, defensive, and diversifying assets. The sentiments are based on a 12-month view. Here, Paul Ilott, managing director of Scopic Research, looks back and summarises the findings taken in Q3 2024.
Risk assets are moving back into fashion with six out of eleven growth assets in our indicator scoring positive sentiments. Contrast this with the start of the year when this number was just two. Japanese equities continue to be multi asset managers’ most favoured asset class by some margin – although a very small number have moved their sentiment level back to neutral.
In the previous quarter’s indicator we began to see signs that multi asset managers were looking more closely at medium and smaller sized companies. For some, this was given added impetus in late July through to early August when weak US job numbers, concerns about the possibility of a US recession, combined with a dramatic increase in the value of the yen following a surprise rise in Japanese interest rates, led most equity markets – particularly amongst Japanese companies and US technology businesses – to lurch downwards before rapidly recovering ground again. Some multi asset managers have taken changes during this period to be early signs that the market is beginning to rotate away from larger US companies – particularly the AI enablers – towards medium and smaller sized businesses. Many are starting to position their portfolios accordingly. Should the dominant performance of larger technology names in recent years weaken and equity returns broaden out to medium and smaller sized businesses then this will have obvious consequences for passive investors.
In the meantime, whilst most multi asset managers are expecting levels of inflation to continue to fall they are not expecting a return to a disinflationary world. They believe that interest rates – although likely to be lower than they are now – will remain at more elevated levels than we have been accustomed to over the past decade.
Positive sentiment towards
UK equities, US equities, Japanese equities, Asia Pacific equities, Global emerging market equities, Long and short dated government bonds, Emerging market bonds (local currency), Gold, and Renewable energy infrastructure.
Negative sentiment towards
European equities, Global high yield bonds, Investment grade corporate bonds, Inflation linked bonds, and Cash.
Neutral sentiment towards
Chinese equities, Emerging market bonds (hard currency), Property, Other commodities (not gold), and Hedge / Absolute return.
Turning more positive on
US equities, Global emerging market equities, and Property.
Turning more negative on
European equities, Japanese equities (despite positive sentiment overall), and Renewable infrastructure (despite positive sentiment overall).
Main image: mel-poole-LuaT29bdjMA-unsplas
