Global Market Sentiment Survey reveals market doubts, need for improved regulation

CFA Institute Members Predict Weak 2012 for Economies, Markets, and Industry Ethics

Global Market Sentiment Survey reveals market doubts, need for improved regulation
See full report at
http://www.cfainstitute.org/ethics/Documents/global_market_sentiment_survey_report.pdf

New York , New York, United States, 15 December 2011

CFA members from across the globe remain pessimistic about the prospects for capital markets in the coming year, according to the CFA Institute 2012 Global Market Sentiment Survey. The survey measures the mood of more than 2,500 CFA charterholders and members on the outlook for world capital markets and the ongoing struggles associated with the global credit crisis. To review the executive summary and full survey results, visitwww.cfainstitute.org/gmss.

“Investors remain terribly concerned about the prospects for market performance and ethics in 2012, and it is difficult to envision a return to strong economic performance without prompt attention to restoring investor confidence,” said Kurt Schacht, CFA, managing director for market policy at CFA Institute. “Industry participants must act to give investors reason to trust in the fairness of markets again, and regulators worldwide need to intensify efforts to deal effectively with ongoing systemic disruptions. With the exception of a few local markets, there is very little to cheer about in 2012.”

Survey Indicates Somber Mood for World Markets

Significant highlights of the global survey include:

  • Equities expected to underperform other asset classes. Globally, 59 percent of respondents predict that asset classes other than equities will be top performers in 2012. However, U.S. respondents are more optimistic, with a majority predicting global equity markets to be top performers.
  • Sovereign debt crisis likely to continue. More than 75 percent of respondents see no improvement in the current sovereign crisis in 2012. This sentiment is widely shared across the globe.
  • Outlook for the global economy is poor. Only 34 percent of respondents expect the global economy to expand, while 29 percent think the global economy will actually contract.
  • Perception of integrity of capital markets remains dismal. More than 75 percent of respondents see no improvement in integrity in the markets in 2012. Of those surveyed, 22 percent think the integrity of global capital markets will be worse in the coming year (a nine-point increase from last year), while 22 percent feel it will be better (a 10-point decrease from last year).
  • Lack of progress in global capability to detect and mitigate systemic risks.Compared to just 23 percent in 2011, 38 percent of respondents see improved regulation and oversight of global systemic risk as the most needed regulatory/industry action in 2012, vs. other options such as improved enforcement of existing laws and regulations.
  • One Bright Spot: the BRICs (Brazil, Russia, India and China) see reason for optimism about local economic prospects. Respondents in BRICs, and in Australia, overwhelmingly predict economic expansion in their home markets in 2012. The outlook is much different in Europe, where 85 percent or more respondents in key countries see no prospect of economic growth.

U.S. Attitudes Break With Global Consensus on Key Issues

Though much of the survey results were relatively consistent worldwide, U.S. respondents take a unique view on several issues, including the potential for equity returns. Key divergence in U.S. attitudes include:

  • Only 12 percent of U.S. respondents believe the U.S. market economy will contract, vs.23 percent who expect the global market economy to contract.
  • U.S. respondents are more optimistic about equity markets than the rest of the world. At56 percent, the United States is the only country in which a majority predicts global equity markets to be top performers.
  • When asked to select the most urgently needed regulatory or industry action, 28 percentof U.S. respondents chose improved regulation and oversight, vs. 38 percent of respondents worldwide. As the second most urgent priority, 32 percent of U.S. respondents ranked effective enforcement of existing laws and regulations, vs. 22 percent of respondents worldwide.
  • At 26 percent, U.S. respondents represent the greatest percentage of those who believe that companies with increased cash on their balance sheets should begin or increase dividend payments, rather than retain the cash for other business opportunities.

The CFA Institute 2012 Global Market Sentiment Survey was created to seek input from CFA Institute members and gather feedback on market sentiment, performance and market integrity issues in the coming year. The survey was conducted online from 2-11 November 2011.

About CFA Institute
CFA Institute is the global association for investment professionals. It administers the CFA and CIPM curriculum and exam programs worldwide; publishes research; conducts professional development programs; and sets voluntary, ethics-based professional and performance-reporting standards for the investment industry. CFA Institute has more than 100,000 members, who include the world’s 96,000 CFA charterholders, in 133 countries and territories, as well as 135 affiliated professional societies in 58 countries and territories. More information may be found at www.cfainstitute.org.

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