May 21, 2024
S&P Global Investment Manager Index™ (IMI™)
Equity investor risk appetite surges to a 2½-year high
Risk appetite has surged higher in May, according to S&P Global’s Investment Manager Index™ (IMI™) survey. The IMI’s headline Risk Appetite Index has jumped from +5% in April to +28%, now sitting at its highest since November 2021, signaling a strong revival of risk-on sentiment. Investors have likewise become more optimistic about market returns in the coming month, with the survey index of near-term expected returns recovering markedly from -26% in April to +10% in May. The improvement registers the first positive sentiment seen so far this year.
Near-term market optimism has also become more broad-based, with sentiment now positive for 9 of the 11 sectors covered by the IMI, up from just 6 in April and its highest since the end of 2021. Only consumer discretionary and real estate suffer from continued negative views, linked to concerns over the impact of higher for longer interest rates, and even here the pessimism is far less pronounced than this time last year. Energy and financials remain the most highly favored, though tech/IT has enjoyed the biggest monthly bounce in investor sentiment in May to result in one of the most bullish degrees of sentiment for the sector seen over the past two years.
Driving the improvement in market sentiment is a marked upturn in the degree to which both shareholder returns and equity fundamentals are expected to boost overall returns in the near term, fueled by better sentiment stemming from the recent earning season. Asked whether, given the recent US earnings results, investors will be revising their overall earnings expectations for next quarter, the IMI survey shows earnings upgrades to have become increasingly net positive for a second successive quarter so far in 2024, contrasting with downgrades seen over 2022 and 2023. Market sentiment also continues to be supported by positive views on the US economy, which remains a perceived driver of US equity returns alongside fiscal policy. However, the wide global economy has slipped back as a negative factor for the market according to investors, albeit only modestly compared to levels seen a year ago. Central bank policy also continues to be seen as a net drag on the market as investors have repriced the expected number of rate cuts this year. Central bank policy is, however, only seen as a mild drag on equities, with the political environment and concerns over valuations once again viewed as by far the largest drags on the market.
Source: S&P Global Investment Manager Index™ (IMI™)
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