Many stock indices around the world have risen significantly since the beginning of the year and are in some cases close to historic highs - despite temporary price declines.
The market environment is anything but carefree not only in view of the pandemic and its consequences, but also from a geopolitical point of view.
In the search for the major market risks, the usual suspects of this year are quickly identified, but the interesting thing about it: The assessment of institutional investors has recently changed significantly.
Kerstin Papon
Editor in business.
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At the moment, international fund managers no longer cite inflation as what they see as the greatest risk for the markets, but rather a more restrictive monetary policy by the central banks, and this with a clear margin over the following risks. According to a recent Bank of America survey of 330 of these investors, who manage $ 968 billion around the world. You are also saying this for the first time since May 2018.
At the moment, 42 percent of those surveyed rate their concerns about the end of the loose monetary policy as the highest among market risks.
A month ago only 22 percent said this was the case.
Most of these investors now expect two rate hikes by the US Federal Reserve (Fed) for the next year.
A month ago, predictions for a rate hike or two in the United States were about the same.
The most recent survey took place from December 3rd to 9th.
On Wednesday evening, the Fed agreed the markets that it wanted to get out of the extremely loose monetary policy faster than previously intended, and indicated three rate hikes for the coming year.
Inflation is a temporary phenomenon
On the other hand, from the perspective of the fund managers surveyed, the inflation risks are declining significantly. They currently follow in second place with a share of 22 percent, while the topic of inflation was still in first place in November with 33 percent. A majority of 55 percent of investors consider the high inflation rates to be only a temporary phenomenon. In the previous month the share was still 61 percent. According to the Federal Statistical Office, the inflation rate in Germany was 5.2 percent in November - more than it has been for almost 30 years.
The virus variant Omikron, which has so far been difficult to assess, has apparently also increased the fund managers' concerns about a stronger resurgence of the corona pandemic. With a view to the greatest market risk, a share of 15 is now compared with the previous 5 percent. The other risks, on the other hand, are evidently taking a back seat at the moment. 8 percent of fund managers currently cite the risk of a price bubble in the financial markets as the greatest market risk, followed by geopolitics (6 percent) and China and the risk of contagion from credit risks (4 percent).
The increased worries of investors about a more restrictive monetary policy have allowed their liquid funds to grow significantly, says the Bank of America. The share of cash in the portfolios has risen from an average of 4.4 percent in November to 5.1 percent most recently. The allocation of the investments is also much more defensive, it is said. Healthcare stocks are particularly popular among stocks. Technology follows - albeit at the lowest level within a year - banks and raw materials. In regional terms, many fund managers primarily favor European stocks and less American ones. In contrast, bonds, utility stocks and non-cyclical consumer stocks are underweighted in the portfolios. Emerging countries are also tended to be avoided.
Investors are cautious, but overall they are clearly relying on rising share prices.
The expectations for the growth of the world economy and the profits of the companies have stabilized or improved further.