Just like the late, great game show Family Feud offered
participants a chance to shout out their view of popular
perceptions, views and opinions of American culture, there are
regular polls of the investment community that afford market
participants a similar platform.
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caption="What are other investors thinking about emerging
Consequently, investors should take the results of these polls
with a grain of salt. In many cases, the results are either skewed
by some recent events and don't reflect longer term outlook, are
very quick to change, or do not provide a clear trading angle. In
all cases, they are backward looking views that don't necessarily
tell the story tomorrow.
Having said all that, BAML compiles a very insightful Fund
Manager Survey which gives useful perspectives on where the
investment community sits on a number of issues. In my view, while
some trends have been obvious -- for example, investors love US
equities, are cautious on gold (
), don't like emerging markets equities (
) -- there are some perspectives that are worth re-stating clearly
because I think they are not going to change anytime soon. In some
cases, I think they are structural long term investment shifts
that, until broken, will grow stronger. Here we go:
1) Quantitative Easing has brought "peace" to the financial
world; this policy is unlikely to end anytime soon.
2) China (
) is guilty until proven innocent: global growth views are high,
but China is not considered a driver. China optimism has collapsed
(from net 60% to net 14%) as did commodity exposure (from net 1% to
net 11% UW).
3) Thank you, Cyprus. You have reminded investors that the EU is
the number one tail risk.
4) Brazil (
) has been death and will remain so until President Dilma worries
less about populism and more about economic growth.
5) Deflation is here until proven otherwise. Growth trades are
en vogue -- US equities, real estate, discretionary -- and
commodities are going lower. The world is full of deflation,
and the Fed and other central banks, try as they might, are in an
environment where fiscal policy is still deflationary. As Big Ben
said the other day in the Fed Q&A session: "Monetary
policy is a blunt instrument." Fiscal policy is much more
important, and right now countries around the world are still
contracting their spending while growing their balance sheets. You
need real rates to move higher before you can generate real returns
and real rates of growth.