Friday, 13 December 2013

CFA Institute Global Market Sentiment Survey 2014

Here is the summary of the the Global Market Sentiment Survey 2014 compiled and reported by the CFA Institute which was published a couple of hours ago. You can download the full report for free here

As a CFA charterholder and participant in the survey, I must admit disappointment in the CFA Institute's lack of addressing and discussing the real cause of financial instability and the business cycle, namely fractional reserve banking backed by a central bank (read: tax payers and owners of the various currencies).

Anyway, here is the summary:

Global Market Sentiment Survey 2014 CFA 

Institute members offer an outlook on financial markets, integrity, and performance 

Investment Professionals Increasingly Confident Global and Local Economies Will Grow in 2014

Economic turnaround in Europe is reflected in greater optimism about the worldwide economy, tempered by concerns over political instability.

 According to the 2014 Global Market Sentiment Survey, the percent of global members expecting the global economy to expand in 2014 has increased to 63%.

According to the 2014 Global Market Sentiment Survey, the amount of members expecting the local economy to expand in 2014 has increased to 57%.
Most members (63%) think the global economy will expand in 2014 — a significant shift from the previous two years. Only 40% of members expressed optimism about the global economy in last year's survey.
Members in the United Kingdom are the most optimistic about the global economy, with 78% expecting expansion.

Members' assessments for their own local markets are also optimistic, with a majority in each region anticipating growth in 2014. Particularly striking is the turnaround of sentiment in Europe.

Political Instability and the End of Quantitative Easing Bring Uncertainty to Local Markets

Investment professionals in some major markets expect political instability and unrest in the Middle East to impact local performance.

Members in various markets suggest political instability is the biggest risk to their local economy. This concern is not restricted to emerging economies, but is most prominent for members in India.

As the Middle East continues to experience political unrest, a majority of members point to the potential effects instability could have on energy prices as a risk factor for their local economies.

According to the 2014 Global Market Sentiment Survey, members think the biggest risks to local markets are weak economic conditions, political instability, and excess regulation.

Members Call for Global Oversight and Local Enforcement

Globally, members cite improved regulation and oversight of global systemic risks as the most important action needed to build investor trust and market integrity. For their local markets, members say better enforcement of existing laws and stronger corporate governance standards are the steps needed to improve market integrity.

In the aftermath of the global financial crisis, investor trust in markets and market participants has eroded. The CFA Institute/Edelman Investor Trust Study confirms that investors worldwide have little trust in the investment profession and believe there is much that can be done to restore trust.

Globally, 29% of members say that the most needed action to improve investor trust and market integrity is improved regulation and oversight of systemic risk. For their local markets, members cite improved enforcement of existing laws and regulations (30%).

Members again identified the misselling of products by financial advisers as the most serious ethical issue facing their local markets in the coming year. In comparison, market fraud was viewed as the most serious issue facing global markets.

 	Members' view on most needed regulatory or industry action to help improve investor trust and market integrity include improved regulation and oversight of global systemic risk and transparency of financial reporting.

Lack of Ethical Culture in Financial Firms Eroding Investor Trust

To rebuild investor confidence in the financial sector, ethical conduct cannot simply be legislated or taken for granted; it must be fostered and encouraged by an ethical culture at the firm-level.

Despite optimism in economic growth prospects, members do not expect the state of integrity in global capital markets to similarly improve.

As in prior years, more than half of members (54%) point to a lack of ethical culture within financial firms as the leading contributor to a lack of trust. This suggests the problem stems more from flawed internal firm culture than inadequate regulatory oversight.