The market movements in the last couple of months have been strange. “Lost and bearish” is as good a description as any of what’s going on.
That’s coming from analysts at Credit Suisse, where a team led by global equity strategy chief Andrew Garfield just released a note describing their recent client meetings.
Investors are worried, but it’s not just bearishness — it’s confusion.
The overwhelming message is that investors are cautious not because they think things are obviously about to go south (though there are concerns) — but because they just don’t have a clue.
“Never have we seen so many clients who just do not know what is happening and have cashed up,” says the note.
In short: ¯\_(ツ)_/¯
Earnings revisions have fallen to a four-year low, equities seem expensive, QE has been tapered and the Federal Reserve looks ready to hike rates. At the same time, the recovery seems unspectacular and the strong dollar will restrain growth for US exporters.
Outside of the US, there are worries about what’s happening in China — which was apparently the “number one topic” — and the rates of growth that are really closer to 3-4% than the near 7% reported.
Since a whopping 32% of global growth is coming from China right now, that’s a bad sign for the world as a whole, and clients are worried about a general deceleration across different major economies.
Things aren’t obviously going dreadfully, but they’re certainly not clearly going well either. So investors are left scratching their heads.
There’s also a fascinating split described by the analysts, between the attitudes of investors in the US and Asia.
The wall of bearishness was extreme in the US — roughly 80% of meetings — but much more balanced outside the US (maybe because markets started to rally in the meantime). Often in the US, the question was ‘why isn’t this a bear market?’. In Asia, on the other hand, most investors were less concerned about China (though, we have always found the closer you get to China geographically, the less concerned investors are about China).