The majority of investors attending the Expert Investor Sweden forum in Stockholm last week expect another equity market correction this year. But not only is their short-term outlook dire, on the longer term they also expect significantly lower returns than a few months ago.
Back in September last year at the previous Expert Investor Sweden, some 53% of delegates expected their equity portfolios to return in excess of 6% per year over the next five years. Even though equity markets have come down about 10% since then, this time only 38% of the audience were that optimistic. The majority believe they should settle for returns between 3 and 6%, while 8% even count on returns below 3%.
China is considered the main source of recent financial market turmoil by many investors. And they are right, said Simon Webber, a global
equity manager for Schroders. “China is very clearly the big systemic issue. They have gone through an unprecedented debt-fuelled boom, with Ponzi schemes, and mis-selling of products,” he said, adding: “We will only get comfortable in a number of years when we see how the losses are taken. This is what is stressing markets.”
Lights in the darkness
So is it all doom and gloom and is there nothing to be excited about? Well, excessive market pessimism as we have seen so far this year always bears some elements of exaggeration.