Muted pessimism is all the rage on Wall Street nowadays. Not to the extent of predicting a market meltdown around the corner, but it’s the standard thinking that slowing growth is upon us. The latest to sound a downbeat view: the folks who buy securities.
The new survey of buy-side firms finds a “significant pullback in positive sentiment as belief in slowing global growth is pervasive.” The quarterly study, done in December by Corbin Advisors, showed a decline in positive investor sentiment to 48% from 67% in September.
That said, outright bearish outlooks were 3% last month (from zero before), which is still minuscule.
The buy-side view of fourth-quarter earnings is in line with forecasts of a slowdown from the robust third period, which is still pretty decent by historical standards. A solid 52% believe October-December earnings will be in line with expectations—the latest FactSet survey of analysts’ expectations is for a 10.6% increase in S&P 500 profits from the previous 12 months. That’s down by half from the third quarter’s showing.
And where in the world will an economic slowdown occur? A considerable 43% say China and 40% point to Europe. Indeed, China is suffering from a ratcheting down of its exceptional growth amid huge debt burdens and stiff US tariffs in the ongoing trade war. Europe, for its part, is facing a big government deficit and chaotic politics in Italy, and a total mess in Britain’s struggles to exit the European Union.
Interestingly, just 7% of respondents are seeing an economic deceleration in the US.