Wealth management CIOs display positive sentiment towards broad equities, private equity and small cap stocks but a more subdued outlook specifically for European equites as markets head into 2025.
Research among 98 CIOs showed sentiment towards UK and European equities has fallen, with net sentiment towards European stocks now in negative territory.
Bonds have also fallen out of favour, with net sentiment of +5 down from +43 last quarter, according to Asset Risk Consultants (ARC), which published the findings.
Within broader equity markets, despite being positive the CIOs are concerned about equity concentration, with overvaluations and the dominance of a few sectors or companies creating potential systemic risks. Other key risks identified include escalating protectionism leading to trade wars and a lingering unease about persistent price pressures and monetary policy responses.
Nevertheless, the survey results show that the net sentiment towards broad equities has increased to 56% from 21% over the past 12 months.
Dr James Cooke, deputy CIO at ARC, which is an investment consultancy, said: “The reality is that many of the risks are interlinked. Trade wars combined with a China slowdown could lead to heightened Taiwan tensions which would lead to fears over advanced node semiconductor manufacturing, which in turn would impact many of the Magnificent Seven.
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“Inflation rising too much could force central banks to tighten monetary policy more aggressively and the money supply is a significant detriment to the return on risk assets.”
On the brighter side, he added, there continues to be a lot of ‘dry powder’ sitting as cash in money market funds.
“We would not be too surprised to find 2025 is a year of heightened animal spirits and increased M&A activity which tends to be good overall for equity prices, particularly of slightly smaller companies. Perhaps this means we will actually see the broadening out of equity markets that many managers talked about around this time last year.”
