The CFA Institute recently polled its broader membership to get a sense of the market sentiment. The sample of 2,500 represents a solid cross-section of the folks that are managing most of the money invested around the world, since CFAs have grown to dominate the population of investment practitioners. The results of the poll are instructive regarding what the investment community is anticipating for 2012. What did they find?
Top of mind for investors is "systemic disruptions," the words CFA Institute uses to characterize the credit crisis in Europe. Approximately 36% of respondents figure this to be the principal concern this year, indicating that a solution to Europe may not be "in the stock market" quite yet. (A similar number note that more regulation or supervision would be a good thing this year.) The panel believes the impact of the credit crisis will last three to five years. A noteworthy 25% believe the crisis will stretch out for the next five years!
The sample also ranked expected returns by asset class, and they believe non-equity asset classes will outperform equities this year. The equity pessimism is driven by both the system risks mentioned before, and a general perception that economic performance will be subpar. The leading candidates for outperformance this year are precious metals (read: gold), commodities and bonds. An amazing 9% believe cash is the best bet, indicating a minority of hardcore bears that still inhabit this market.
That said, when asked which equity markets will generate the best returns, more than 50% of the CFAs cited the U.S. This is a relatively bullish sign for the U.S. markets, with the caveat that we do not know if there is "home team" bias in that voting. In fact, only in the U.S. did a majority think their home market would be a positive performer. In the other regions (Europe, Asia and so on) only minorities of respondents thought their home markets would be top performers. The U.S. respondents were also most adamant about companies paying dividends.
In the U.S., it seems, cash is king -- at least for stock investors!