Not only have expectations of ‘above trend’ growth and inflation hit a five year high at 12%, double the November number, the bulls are back in charge when it comes to the outlook for corporate profitability. According to the latest print of the bank’s ’s Global Fund Manager Survey, a net 56% of those surveyed said they expect global profits will improve in the next 12 months, up from 29% in November.
57% of fund managers polled expect the global economy to be stronger in the next 12 months, up from 35% in November and 19% in October.
Inflation expectations too are high. Although moderating slightly from 85% to 84% the number of fund managers that expect global CPI to rise from current levels remains at levels not seen since 2004.
This shift in inflation expectations and the concomitant rise in animal spirits must, in large part, be attributed to the election of Donald Trump to the White House, as very little else has changed. Although, some can probably be attributed to the general excitement with which western markets tend to greet the oncoming Christmas period.
Such optimism is largely what has been missing from what is often characterised as the least enthusiastic equity bull market in memory. And, it does have a number of implications from an asset allocation point of view.
For Mark Burgess, Columbia Threadneedle’ CIO for EMEA and global head of equities: “The rationale keeping the bubble inflated for now is that low global growth and inflation have a strong correlation with low interest rates and low bond yields and the general feeling that rates should indeed be depressed.”
