December 14, 2016 (London, UK) – European investors are increasingly optimistic about stock market returns in 2017, according to J.P. Morgan Private Bank, and are less concerned about geopolitical events, despite a year of political shocks. Findings from the bank’s latest Private Client Survey* explore European investor expectations for 2017, including rising optimism for emerging markets and public equities, and increased appetite for alternative strategies.
Public equities expected to be the best-performing asset classes
In contrast to the previous Private Client Survey released in May, European investors have become more optimistic about stock market returns over the last six months, with 39% believing public equities will be the best performing asset class over the next 12 months. Alternative strategies also attracted attention from investors, with a quarter (28%) expecting them to provide good returns. Unsurprisingly, in today’s environment of record low or negative bond yields and interest rates, cash and fixed income appeal to just 9% and 7% of investors respectively.
“While the spring survey revealed a change in sentiment towards European equities, the latest survey shows investors now favour U.S. equities again, with a third (32%) believing the U.S. market will outperform other regions,” said Peter Gabriele, EMEA Private Bank Head of Investments. “On the other hand, only 16 percent of clients believe European equities will be the best performing equity market in 2017.”
Risks for financial markets in 2017
Following a year of political shocks, investor concern towards geopolitical events has decreased, as perceived by the impact of Brexit and the U.S. presidential election. Investors are currently most preoccupied with policy or economic risks for markets. A quarter (25%) of clients state central bank policy divergence as the biggest risk in 2017; followed closely by low inflation or deflation (24%). That said, Donald Trump’s surprise U.S. presidential victory is a concern for 18% of investors, and ongoing fears surrounding the Brexit and the potential European slowdown remains for 16% of investors.
Geographical opinion is consistent across Europe with the exception of Switzerland which is the least concerned about the impact of the U.S. presidential election, while those in Sweden are the most relaxed about the impact of Brexit on the economy.
Rising optimism surrounding emerging markets
With returns on cash and government bonds in the developed world just above zero or even negative, investors have been turning their attention to emerging markets. Over a quarter (30%) of investors believe emerging markets enjoying an economic rebound will be the biggest surprise over the next 12 months. U.K. investors remain the most optimistic about emerging markets, with 42% of investors stating that this will be the biggest positive, followed by 34% of investors in Germany.
U.S. dollar to be the strongest performing currency in 2017
The strength of the U.S. dollar also prevails with 50% of investors believing the currency will be the strongest performing currency over the next 12 months - and investors in France and Spain remain the most confident on this. On the other hand, one quarter (24%) of investors think gold will be the standout performer in 2017.
Despite this, confidence in the Sterling still remains low, with only 12% of investors believing it will be the strongest performing currency next year. This is only slightly ahead of the euro (8%) and the Japanese yen (6%).
About the Survey
* More than 600 high-net-worth investors participated in a Private Client Survey which polled participants on key European, U.S. and global investment issues. It was conducted as part of J.P. Morgan Private Bank’s latest Investment Insights series, held in seven of Europe’s leading cities earlier this year.
About J.P. Morgan Private Bank
J.P. Morgan is a global leader in financial services to corporations, governments, for-profit and not-for-profit institutions and wealthy individuals. Through its private banking franchise, the firm delivers customized wealth management advice and solutions to wealthy individuals and their families, leveraging its broad capabilities in investing, tax and estate planning, family office management, philanthropy, credit, fiduciary services and special advisory services to help its clients advance toward their own particular goals. For more than 150 years, the Private Bank’s comprehensive and integrated product offering, commitment to innovation and integrity, and focus on placing the interests of its clients first and foremost have made J.P. Morgan an advisor of choice to people of significant wealth around the world.
J.P. Morgan Private Bank is a marketing name for the private banking business conducted by JPMorgan Chase & Co. and its subsidiaries worldwide.
Media Contact: Jason Lobo, J.P. Morgan Private Bank, +44 020 7742 7305