Education Series: Single-Stock ETPs

Global Fund Managers: Most Bearish This Year

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For its September update of its iconic Fund Manager Survey (which has been covered before), Bank of America, 212 panellists managing $616 billion in Assets Under Management (AUM) participated and provided some fascinating (and prescient) insight.

Over the past two months, the percentage of respondents expecting a weaker economy in the next 12 months has increased by 5% since the last survey.

“Stagflation” expectations, i.e. below-trend growth and above-trend inflation, are now at a record high.

With regard to the Eurozone, the survey records a recession to be most likely as a result of the energy crisis (as predicted in previous articles).

Now, over in the US, the Fed Rate hike is pinned as a major influence on market direction: the higher the rates, the lower the market goes. The survey was held a little before the current 75 bps rate hike was done to bring the rates to the 3% to 3.25% range. A majority of the respondents indicate an expectation of the rate to go even further to the 4 – 4.25% range.

An overwhelming majority of the respondents expect this to happen all through 2023, with the largest set of expectations at the Q1 and Q2 periods.

The survey respondents also reported their asset allocation to stocks at all-time lows. It bears noting that “allocation” here means a long-term conviction that holding on to the asset is a “value builder”.

In terms of stock holdings, however, survey respondents indicate that they’re increasing their holdings in “defensives”, i.e. utilities, staples and healthcare stocks.

Outside of equities in general, two sectors/supersectors considered to perform especially badly would be both Eurozone and tech stocks (i.e. generally, the likes of Apple and Google).

As of right now, the US 2-Year Treasury bond yields a better return than the S&P 500. Despite this, in a report released by the same team subsequent to the FMS, BofA indicates that current outlook for the bond market is a record third instance of a “bond bear market” expected to last until 2024. The primary reason for this is that bonds deliver inflation-beating returns. Even at current yields relative to the US market, these returns are not being considered to be strong enough returns to beat the net effect of inflation.

Last week, Mr. Jurrien Timmer, Director of Global Macro at Fidelity Management Research (FMR), made an interesting estimation: after the FOMC update was delivered, the forward-looking fair value for the S&P 500 dropped to 14X Forward Earnings Per Share (EPS) that day, which was 15% below that day’s level. If earnings growth ends up being flat (at $219) instead of growing +10%, fair value declines by 36%.

Mr Timmer further stated that equities have seen little outflow, and money markets have seen very little inflow since February 2020. While bond funds & ETFs have seen more material outflows, investors will capitulate and start exiting if the stock market goes down to 3500. The 3500 level is around 5% away from the current day’s level.

Goldman Sachs also indicated last week a familiar theme from earlier articles: the price ratio multiples are rapidly crumbling, as exemplified in the downward trend in the S&P 500’s forward multiples.

With regard to the S&P 500, Goldman Sachs also had a similar assessment: the index is expected to end 2022 roughly 1.6% away from the current day’s level in a “soft landing” scenario and at 3400 in the “hard landing” scenario. Both scenarios see a recovery in 2023 which would still be far below highs seen earlier this year.

Researchers at Citi warned last week that the Eurozone, Brazil and Canada will be entering recessionary periods in Q4 or shortly thereafter.

Researchers at Citi warned last week that the Eurozone, Brazil and Canada will be entering recessionary periods in Q4 or shortly thereafter.

The researchers, interestingly, estimate the U.S. to be entering a “recessionary period” from Q3 of 2023 onwards, while Germany and UK are both indicated to already be in recession.

Also interesting is the conclusion that China isn’t in recession. While it’s entirely conceivable that the Chinese government will be loathe to declare it, estimates from its own Customs Bureau indicate exports to the U.S. (one of its largest trading partners) shrinking as consumption outlook diminishes. Infrastructure and exports are two very important pillars of the Chinese economy. However, it’s possible that there isn’t nearly enough reliable data right now for the researchers to make any prognostications about China.

Also, a report from Deutsche Bank last week indicates that its homeland Germany will likely be bearing the brunt of GDP shrinkage in the Eurozone in the next year.

The sampling of outlooks offered via the likes of Bank of America, Fidelity, Goldman Sachs, Citi and Deutsche Bank are neither a sea change from opinions offered in earlier months nor limited to these companies alone’ most reports published by leading institutions have been grim for the past 2-3 months offered above. Given that the year is three-quarters done, the conclusions arrived at are getting more and more concrete. For investors continuing to buy into the idea of an upward swing in market valuations, the warning most suitable would simply be: “Caveat emptor!”

Exchange-Traded Products (ETPs) offer substantial potential to gain magnified exposure with potential losses limited to only the invested amount and no further. Learn more about Exchange Traded Products providing exposure on either the upside or the downside to the S&P 500, the upside or the downside to the Nasdaq-100, and the upside or the downside to the German DAX.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Sandeep Rao


Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

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Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak


Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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