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Portfolio > ETFs > Broad Market

U.S. Investors Continue to Express Doubt About European Debt Crisis

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A new survey polling investors in the U.S., Hong Kong and Japan suggests that clients do not believe the resignation of leaders in Italy and Greece – along with proposed measures by Euro zone officials – will halt the European debt crisis.

In fact, 63 percent of U.S. respondents to the Monex Global Retail Investor survey, carried out by TradeStation Securities, Inc., say that turmoil over Europe’s sovereign debt will continue for at least another year. The survey’s most experienced traders take an even dimmer view, with 68 percent saying that resolution is at least a year away.

Monex has been conducting its monthly retail investor survey with its Japanese clients since October 2009. The survey started in June 2011 and is conducted on a quarterly basis.

Despite pessimistic expectations for resolution of the European debt crisis, respondents are showing optimism about certain industry sectors. A majority of customers expect energy, technology, utilities and basic materials to be attractive over the next three months. Their expectations are lowest for real estate, autos, conglomerates and financial services. U.S. stocks, say a majority of customers, will outperform stocks in Europe/U.K., Asia (excluding Japan) and Japan. Nearly half of all US respondents said the U.S. dollar would outperform the Euro and Japanese yen over the next three months.

The report uses the Diffusion Index to assess investor sentiment. (DI = percentage of positive responses – percentage of negative responses)

Other findings from the survey are summarized below.

Japanese investor expectations of Japanese, U.S. and Hong Kong stocks have improved over the last month. Their expectations for China, while improved, are still negative.

  • Expectations for Japanese stocks improved by 24 points from a DI of 0 points to 24 points.
  • Expectations for U.S. stocks improved by 30 points from -2 points to 28 points.
  • Chinese stock expectations improved, but from -29 points to -20 points, a gain of 9 points.

When asked about their expectations for global equity markets over the next three months, investors in all three markets showed improved but still negative outlooks.

Investors in all three markets exhibited a “home market” bias with respect to their opinions about both equity and currency markets.

  • When asked which equity market would perform best over the next three months, 70 percent of U.S. investors said the U.S., while only 30 percent of Japanese investors and 26 percent of Hong Kong investors answered the U.S.
  • In each market, investors in that market had higher expectations for their home equity market than investors in other markets surveyed.
  • Results were similar for currencies. Forty-nine percent of U.S. investors said the dollar would strengthen the most over the next three months compared to only 17 percent of Japanese investors and 28 percent of Hong Kong investors favoring the dollar.
  • As with their equity markets, each market’s investors expected their home currency to perform better than respondents in other markets.

More than half of the investors assume it will take more than a year for the European debt crisis to be resolved.

  • When asked how long it would take to resolve the European debt crisis, more than 60 percent of investors in the U.S. (63 percent) and Hong Kong (62 percent) answered more than one year.
  • Japanese investors were only slightly more optimistic, with 52 percent saying more than one year.

When asked about their perception of the effectiveness of actions taken to date to resolve the European debt crisis, responses were similar, and again Japanese investors were slightly more optimistic.

Sixty-four percent of U.S. investors and 51 percent of Hong Kong investors said that actions taken to date have had no effect.

Japanese investors were again slightly more upbeat, with 42 percent saying actions have had no effect and 33 percent saying actions had been effective.


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