Trade wars, inflation and equity concentration were highlighted as the key risks for CIOs in the coming year, according to Asset Risk Consultants’ (ARC) latest Market Sentiment Survey.
Following Donald Trump’s US election win in November, fears of potential trade wars and supply chain disruption have grown sharply.
According to the survey of 98 CIOs, there is also a lingering unease about persistent price pressures and monetary policy responses.
Meanwhile, overvaluations and dominance of a few sectors or companies could create potential systemic risks.
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Dr James Cooke, deputy CIO at ARC, said 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. 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, there continues to be rather a lot of cash in money market funds or ‘dry powder’. 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.”
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Despite the concerns around market concentration, the net sentiment towards equities has increased to 56%, up from 21% over the past 12 months.
However, the ARC survey found that sentiment towards both UK and European equities has fallen, while CIO enthusiasm for bonds has also waned over the last quarter.
This story was written by our sister title, Portfolio Adviser
