An overwhelming majority (83%) of institutional investors in the eurozone, the UK, the US and Canada among other countries see a risk of a global financial crisis as the world deals with the economic fallout of the coronavirus pandemic, new data has revealed.
Block-Builders, which publishes forecasts and investment news, cited a survey of 500 major investors from 29 countries which found 60% of respondents expect a serious crisis in the next one to three years, with a majority of experts believing that risks from the pandemic are not yet sufficiently priced into the market.
A crucial reason for the negative outlook is an increase in savings among the average citizen. “Savers could endanger the economic recovery... during the pandemic, savings rates skyrocketed — if normalisation fails, this could fuel a potential economic crisis,” the report said.
“Despite all the risks, many stocks are still trading at all-time highs,” said Block-Builders analyst Raphael Lulay. ”Whether we are already in the midst of a speculative bubble remains to be seen. Many market participants continue to see the stock market as almost without alternative.”
Block-Builders recently reported on the optimistic outlook of private investors for the stock market in the year ahead. Some fund managers also appear to share this view. But new data has shown scepticism among investors.
“Around 80% of major investors are of the opinion that the markets have not yet sufficiently priced in the long-term risks posed by the corona crisis,” the report explained.
But it also noted that there is a broad consensus among institutional investors that Asian securities have great growth potential, regardless of the risks.
One of the reasons for this is that in Asia “countries such as China have got a better grip on the pandemic and their economies are now correspondingly growing much faster.”
“British economists assume that the People's Republic of China will replace the USA as the world's largest economy as early as 2028. This would be five years earlier than previously expected,” the report added.
Meanwhile, the deep scars left by the pandemic on entrepreneurs’ coffers are becoming more and more apparent, the study said. The situation is at its most acute in the hospitality sector, where 19% of business owners say they have just four weeks of liquidity left, the report found.
Last month, business leaders in the UK said bars, restaurants, pubs, cafes and hotels have been left in “intensive care” by England’s coronavirus lockdown restrictions.
It was also reported that regional lockdown rules will cost more than 150,000 English venues an estimated £7.8bn ($10.4bn) in lost trade if they are in place throughout December, business chiefs have warned.
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