A recent poll by the Economist Intelligence Unit and BNY Mellon (via FT) gave 800 institutional investors and executives various economic/geopolitical themes. They were then asked how likely they thought each theme was and what impact that theme would have on their portfolio. Below are some of my key takeaways:
- Many of the themes were rated as “Highly Negative” in terms of the impact on their portfolio. To me this signifies the heightened risk aversion given the global financial crisis of 2008.
- The only “Likely” positive impact theme was that the internet and social media will be a catalyst for economic change around the world. This always appears to be the case – a technological advancement stimulates global growth.
- The only “Highly Likely” and “Highly Negative” theme was unrest in the Middle East. When is this never likely or negative?
- A sovereign default is toeing the “Unlikely” and “Likely” line while being highlighted as negative. You can read in my Greek posts here and here why that might be bad.
- Any theme involving Emerging Markets is either in the “Highly Positive” or “Highly Negative” categories or close to it, which shows the growing interconnectedness of the global economy/markets, the rising dependence on those markets for growth, and/or the increasing stakes portfolio managers have in those markets.
- There was one theme that highlighted the risk of monetary or fiscal tightening. That is one of my concerns.
You may have noticed, I like lists and graphs as they are not only fun to look at, but also can provide some good data that would have slipped through the cracks. This one in particular was good because it highlights many themes and risks that are often overlooked, but need to be considered when constructing a portfolio.
