I’ve said it until I’m blue in the face (or maybe “yellow in the face” is the better way to phrase it given my recent brush with a jaundiced death): geopolitics is the single most important factor for markets headed into the new year.
Personally, I’m predisposed to thinking that geopolitics is almost always the most important factor for investors to consider when thinking about markets unless there’s some clear and present danger like the imminent collapse of the US housing market.
Needless to say, the rise of populism across the globe and the attendant resurgence of nationalistic sentiment amongst an electorate that in my not-so humble opinion has been duped by demagogues, means that perhaps now more than ever, we need to be acutely aware of the political sea change taking place across the globe.
For the time being, stocks don’t seem to care but a new survey conducted by Barclays with some 900 investors suggests that geopolitics is front and center in their minds when it comes to risks. Below, find some of the charts from the poll…
Meanwhile, here are the results of a recent institutional client survey by Citi (via Bloomberg):
Clients Show Falling Cash, ‘Altered Mindset’ of Optimism: Citi
Institutional clients demonstrated ‘a meaningfully more upbeat outlook’’ in latest survey, Tobias Levkovich, Citigroup’s chief U.S. equity strategist, writes in a note.
Median cash positions fell to 3.5% of assets, versus 7.5% in late September and 5.0% at this time last year
60% believe 20% rally in stocks is more likely than 20% correction from current levels
60% anticipated small caps outperforming
Respondents expect earnings to rise about 7% on average in 2017, up from less than 4% in late September
80% believe that there will not be a recession in either 2017 or 2018
Less than 5% considered 10y Treasury yield below 2% by this time next year
U.S. remains most favored market with more than 70% calling for a stronger dollar
European, emerging Asian and Japanese equities tied for second
Financials most loved sector by “a large margin,” followed by energy, industrials and technology
Utilities, along with consumer staples, are least favored
Dividend stocks have “lost their appeal” with 80% currently looking for them to underperform, compared with more than 70% expecting them to outperform in June