According to the latest edition of the Expert Investor fund manager sentiment survey, European equity sentiment increased at the fastest monthly pace in almost four years in January. 12-month forward return expectations are now back at levels last seen in the summer of 2016. The majority of asset managers who were polled expect European equities to post returns of at least 5% over the next five years.
These same asset managers, however, have mixed return expectations for EM and US equities. Bulls and bears are equally split as for the former, and uncertainty rides high as far as the outlook for US equities is concerned.
Trump tax plan
The depressed outlook for US equities comes as Donald Trump’s ‘tremendous’ tax plan roll-out is forthcoming. The plan is expected to feature a drastic corporate tax reduction and will further boost stock markets, according to a recent Trump tweet (see below).
However, this is FAILING to convince asset managers, who prefer to bet on another horse: European equities. The asset class is also returning to favour after a 2016 characterised by poor performance and strong outflows. According to Morningstar fund flows data, European equities narrowly overtook US equities in terms of net inflows in January.
Stock market hits new high with longest winning streak in decades. Great level of confidence and optimism – even before tax plan rollout!
— Donald J. Trump (@realDonaldTrump) February 16, 2017
