Investors Turn Bearish As 73% Predict Recession

Management consulting firm Boston Consulting Group's tenth annual investor survey found 73% of investors believe a recession is on the horizon, up from 53% the previous year, amid growing concerns about valuations and the health of the global economy.

SocGen's Edwards: Corbyn will be seen as moderate in next downturn

The survey of portfolio managers, as well as buy-side and sell-side analysts, found market expectations for annual total shareholder returns was found to be at a record low since the survey's 2010 inception, with investors anticipating an average of 5.6% over the next three years.

As a result, the survey found investors are by ratio of two to one spending more time making investment decisions, taking a more value-oriented approach and exiting investment positions more quickly.

Meanwhile, 48% said that they are actively considering environmental, social, and governance factors in their investment decision-making process in efforts to capture long-term performance.

Amid the bearish outlook, 82% of professional investors said they are now encouraging corporates to begin to focus on long-term value creation.

However, respondents estimated that only 50% of the companies they invest in have properly aligned business, financial and investment strategies, while 48% of the companies need to be more aggressive about pursuing investment in R&D in order to build value. 

BCG senior partner Alexander Roos explained: "Given the intensifying concerns about the investment environment, valuations, and the economy, most investors want companies to do more to prioritize long-term value creation over short-term results.

"Many think management teams are not doing enough in this regard."

Another BCG senior partner Jeff Kotzen added: "In a highly dynamic and complex business environment, investors want companies to deploy their resources to drive innovation and support businesses that have the potential to achieve competitive advantage and deliver strong and sustainable value creation.

"Leaders and executives need to balance building resilience in the face of short-term headwinds with making long-term decisions that secure commercial and capital market advantage over the long term."

Specifically, 43% of investors said that companies need to improve their capital allocations strategy, with 64% of respondents saying they were prioritising organic reinvestment

Inorganic investments and cash payouts are now less favoured by investors, with 39% advocating for M&A as a preferred use of corporate cash, down from 48% the previous year.

JP Morgan CEO warns government shutdown could lead to zero US growth in Q1

Just 22% of respondents said that they prefer dividend increases, down from 30% last year, while 21% said building cash on the balance sheet as an important priority.

Elsewhere, 38% said that companies need to improve risk management processes, while 37% said that companies should improve their strategic development and planning.