Well, Barclays is out with their latest global macro survey and although the results are somewhat predictable, there are some visuals worth highlighting if for no other reason than they underscore the extent to which growth concerns have supplanted “the usual suspects” (if you will) at the top of investors’ worry list.
The survey itself – the 34th edition – polled more than 500 respondents during the week of March 18. Nearly half of those surveyed were long-only and three quarters were based in either North America or Europe. Here’s the breakdown by investor type and primary focus:
(Barclays)
Barclays doesn’t mince words or otherwise beat around the bush when describing the takeaways. “[There are] two key signals from this quarter’s survey”, the bank writes. They are:
- Growth has shot up to the tip concern, eclipsing all other risks
- Investors have become more bullish on emerging markets
On the first point, global growth worries have obviously been the talk of the proverbial town for months. The chart on the left below shows the combination of “deterioration in DM growth” (green) and “weak growth in China/EM” (dark blue) easily outstripping all other concerns.
(Barclays)
The chart on the right shows that nearly 60% of investors think there’s more downside than upside for the euro-area, which is on the front lines thanks in no small part to a string of disappointing data out of Germany. Italy is already in a recession and FinMin Tria has been very vocal when it comes to describing the extent to which spillovers from Germany are weighing on the Italian economy at the worst possible time.
Read more from this week
Of course the prospects for the German economy are clouded by a still-tenuous outlook for China. This week brought good news in the form of upbeat PMI data out of Beijing, but only time will tell if the inflection is sustainable.
The following chart shows the evolution of equity investors’ top concerns and it’s the same story: Concerns about a synchronized global slowdown have proliferated since Q4.
(Barclays)
That said, equities are still the “favorite” asset class, but as alluded to in point number two above, EM (as a whole) is gaining ground fast.
(Barclays)
EM is the favorite pick for credit investors polled by Barclays and for whatever this is worth, the EM equity ETF just logged another stellar week, rising some 3% on the back of a seven-session rally for the MSCI EM index. Implied vol. on the ETF is now back at levels consistent with what we saw in 2017, a year of near unprecedented calm across many markets.
Meanwhile, in keeping with the “global slowdown” theme, the percentage of respondents worried about deflation spiked from the Q4 edition of the survey, while the percentage of those worried about inflation dwindled.
(Barclays)
There’s much (much) more in the full survey, but you get the idea. The macro narrative is now dominated by concerns about a deepening global slowdown.
I suppose the most amusing thing about all of the above is that if you look at the risk factors that have now taken a backseat to growth concerns (e.g., geopolitical risks, monetary tightening, trade war), they all played a part in contributing to the slowdown we’re now seeing across developed market economies. I guess the feedback loops are hard to capture in a stacked bar chart.
We’ll leave you with one last visual, which is just a more granular look at respondents’ assessment with regard to various macro flashpoints.
(Barclays)
500 pros? Bah. What is that, like a 0.9 on the Heisenberg scale? Can 500 pros explain how municipal elections in Izmir, Turkey will affect the carry trade in Â¥? Nope. Will they do with squiggly lines and charts with red and green lines pointing in opposite directions? I don’t think so. I’ll take the rottweiler over a rottweiler’s weight in chihuahuas.