Posted inEquitiesEuropeJapan

Developed markets equity sentiment on the wane

Enthusiasm for European equities has started to recede, with the majority of Europe’s fund selectors planning to keep their allocation unchanged. The last time more European fund buyers were keeping their exposure stable rather than increasing it was about three years ago. The countries where European equity sentiment deteriorated most this year are Belgium (from 79% buyers to just 30%), Switzerland (73% to 32%) and Norway. In the latter country, there even are no European equity bulls left.

Graph: European equities Pan-European sentiment

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Tracking the trend

Appetite for European stocks seems to follow in the footsteps of that for US equities, albeit with a delay of about a year. Pan-European US equity sentiment has been decreasing already for quite some time, only to fall into negative territory this spring.

Graph: US equities Pan-European sentiment

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Germany is the only country where appetite for the asset class is still significant, with 40% of fund selectors stepping up allocation for the next 12 months. In most European countries sentiment is negative, with Swiss, Scandinavian and Dutch fund selectors being most bearish.    

For Japanese equities, sentiment is now also net negative. Traditionally, about half of European fund selectors intend to keep their exposure to the asset class stable. But, as confidence in the effectiveness of Abenomics is fading, more and more fund selectors are decreasing their allocation to Japan or are not using the asset class.

Graph: Japanese equities Pan-European sentiment

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Part of the Bonhill Group.