Most professional investors predict a sudden plunge in global stock markets of at least 10 per cent before the middle of 2019, a new survey suggests.
Some 71 per cent of money experts believe markets are due a correction in that time frame, while 16 per cent think it could take longer to happen, but 12 per cent don’t expect a substantial drop at all.
Global markets have soared in recent years, and more than a third reckon the most likely trigger for a slump is fear stocks have become overpriced, according to the survey of investment and pension fund bosses by Managing Partners Group.
Riding for a fall? Most professional investors predict a sudden plunge in global stock markets within the next 18 months, according to a new survey
Top US markets have racked up an impressive run of records last year and into 2018, while London’s FTSE 100 is also currently trading at all-time highs.
Anticipation of massive corporate tax cuts in the US, cheerled by President Donald Trump and passed by Congress in December, have helped fuel the gains across the world.
But some market pundits have long warned that US stocks in particular are overpriced, and that at some point this will cause a stampede for the exit.
In the MPG survey, other possible reasons cited for a market correction were a ‘black swan’ event – meaning some random surprise – a world crisis like a conflict involving North Korea, a rise in interest rates, a financial mess in China or Europe, and central banks halting their money printing programmes.
Among the professional investors who expect a market correction in the fairly near future, 36 per cent believe it will be contained at 10-15 per cent. Some 28 per cent are more pessimistic, forecasting a plunge of 15-20 per cent.
And 32 per cent predict more of a crash, with losses of 20-30 per cent. But just 4 per cent think it will be even worse, with 30-40 per cent wiped off markets.
MPG reports that 20 per cent have already changed their portfolio in the expectation of a market correction, while a further 37 per cent plan to do so soon.
Of those who have switched up investments, 90 per cent have reduced their exposure to stocks and 30 per cent to fixed income assets – government and corporate bonds. Some 40 per cent have switched to cash, 50 per cent to alternatives such as hedge funds and 40 per cent to real estate.
Jeremy Leach, chief executive of Managing Partners Group, said: ‘Equities are looking highly valued on both sides of the Atlantic and it looks as though the market is just looking for an excuse to correct.
‘Our research shows that a substantial proportion of investors now expect this to happen and many have already reduced exposure to equities while looking at alternatives.’
Managing Partners Group specialises in managing alternative asset classes for institutions and sophisticated investors. In December, it interviewed 54 institutional investors – professionals in roles including pension fund managers, chief risk officers, chief financial officers and chief investment officers.
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