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NATIXIS INVESTMENT Managers just released its 2022 institutional investors’ outlook. The firm surveyed 500 portfolio managers, asking their thoughts on what the next year might look like in the financial markets. The managers—who oversee $13.2 trillion of assets—were generally optimistic, but didn’t expect the recent torrid pace of stock market gains to continue.
The survey found that 35% of institutions plan to decrease exposure to U.S. stocks, allocating more to developed European and Asian markets, as well as emerging markets. Those findings aren’t surprising given the lofty valuations on U.S. large-cap stocks. What sort of returns can we expect? Vanguard Group recently published its latest 10-year asset class outlook. Spoiler alert: Most of the return projections are well below long-term averages.
Back to Natixis’s data: 62% of portfolio managers expect pent-up consumer demand for big-ticket items to be a significant driver of growth in 2022. A December survey from Bank of America Global Research concurred. It seems the onus is on you and me to keep swiping our credit cards.
“Cautious optimism” from survey respondents was another key theme. The majority of institutional investors expect higher volatility from stocks and bonds. They also expect economic “reopening” stocks to outperform “stay-at-home” plays.
In a not-so-rosy twist, the results show a whopping 68% of money managers predict the bull market will end once central banks—including the Federal Reserve—stop printing money. The Fed has already begun tapering its bond-buying program. Traders expect perhaps three interest rate increases next year.
Still, we should take such stock market survey data with a grain—or boulder—of salt. As famed trader Jesse Livermore once quipped, “The stock market is never obvious. It is designed to fool most of the people, most of the time.”
Ken Fisher used to identify all the market forecasts for the coming year, figure out where they were clustered in terms of down a lot, down a little, up a little, up a lot, asserting that the consensus forecast was the one possibility he could almost certainly dismiss!
I wouldn’t take this approach, but there is definitely something to the idea that consensus forecasts are the least likely outcome when it comes to the markets. :>)
Anyways, those of us steadfastly maintaining their exposure to a geographically diversified portfolio would appreciate seeing some market strength there!
Definitely! Unfortunately, capital market outlooks have generally been the same for the last 5+ years (and almost all have been wrong). They are bound to be right one of these years.
Thanks for the wonderful piece, Mike. I always wondered where I heard that quote (“The stock market is…designed to fool most of the people, most of the time.”) Now, I know.
The fact that two thirds of money managers predicate the continuation of the bull market on QE or money printing seems to suggest that QE is not just a technical tool but a behavioral one.
Thank you! There’s definitely something to be said for taking the contrarian position based on these outlooks. I imagine it’s rare when investment managers are outright bearish though–lots of career risk taking that stance repeatedly. And I love that quote. I’d share it with my students constantly.