What investment risks are top of mind for leading investment professionals worldwide?
If the audience polling conducted last week at the 64th CFA Institute Annual Conference in Edinburgh is any indication, there are three: higher-than-average global market volatility; the threat of fiscal deficits and sovereign defaults; and the potential for rising inflation.
A slight majority of attendees who participated in the polling also felt that despite the response of global authorities to perceived gaps in financial regulatory regimes, regulators have, in general, “missed an opportunity to reform.” And when it comes to the future of the euro, attendees were roughly split in their thinking: 33% said they thought 1 to 3 countries would abandon the euro, while 35% said that additional countries would join the euro bloc.
The audience polls are far from scientific and captured the opinions of only a segment of the 1,335 delegates in attendance. Nonetheless, the results offer directional indications about the threats and opportunities on the horizon as investors grapple with fast-moving developments in the markets where they invest.
A few key findings are highlighted below.
What is your general opinion regarding the response of global regulatory authorities to the financial crisis?
28% Responded appropriately
20% Too heavy-handed
51% Missed an opportunity to reform
The price of gold has risen 23.73% in the past year. Where do you think it will be (in USD/oz) a year from now?
17% We’ve reached the top (around $1500)
31% There’s farther to run ($1650 to $1825)
23% Sky’s the limit thanks to USD weakness (>$1825)
26% The bubble will burst (below $1200)
What troubles you most about the global economic outlook?
7% Severe deflation
14% Modest deflation
5% Stable inflation
42% Rising inflation
29% Higher inflation
What is the biggest external threat to your investments?
12% Exchange rate manipulation/protectionism
9% Energy price and supply
55% Sovereign risk: Fiscal deficits and default
16% Water shortages/food prices
Between now and 2030, which of the following is most likely to challenge the US dollar’s status as the world’s reserve currency?
24% Dollar will not be challenged
39% A basket / synthetic currency
What do you think will happen to the euro in the next 3 to 5 years?
19% No significant change
33% 1 to 3 countries will abandon the euro
6% 4 or more countries will abandon the euro
4% The euro bloc will dissolve completely
35% Additional countries will join the euro bloc
What is your expectation for global market volatility in the next year?
74% Higher than historical average
19% At historical average
6% Lower than historical average
Which do you think is the greatest risk to Chinese economic growth?
12% Asset bubbles (equity valuations and housing)
17% High commodity prices/inflation
10% Reliance on exports
24% Political risks
8% Legal/regulatory/governance/investor trust
Note: Audience polling is not statistically significant and results do not necessarily reflect the views of CFA Institute.