State Street Corporation (NYSE: STT) today launched the latest findings from its Brexometer Index, a quarterly pulse survey of institutional investor sentiment about the United Kingdom’s departure from the European Union.
The Q4 2017 survey1 indicates a slight decrease in confidence, with 40 percent of respondents expecting positive global economic growth in the near-medium term (three to five years), a seven percent decrease from the Q1 2017 survey2.
In addition, more than one third (36 percent) believe asset owners will not change their level of investment risk over the next three to five years, a 10 percent rise since Q3 20173.
The majority (82 percent) of institutional investors now believe Brexit will have an impact on their business operating models, rising from 72 percent in the third quarter.
Other key findings of the Q4 2017 index include:
- 60% of institutional investors expect their allocation to stay the same – a 7% increase from Q3;
- Over one fifth (22%) of respondents believe Brexit will have significant impact on their operating models, compared to 17% in Q3;
- One in nine (12%) respondents remain uncertain over changes to their holdings of UK assets over the next six months, an eight percent increase from the Q2 survey4;
- 27% of respondents believe asset owners will decrease their levels of investment risk over the next three to five years – down 9% from Q3.
Michael Metcalfe, head of Global Macro Strategy at State Street Global Markets said, “The clock continues to tick on Brexit, but there remains limited evidence that financial markets or their participants are discounting a worst-case outcome. Our metrics suggest that the majority of investors still have no immediate plans to change their holdings of UK assets. This has not changed even though the Bank of England is expected to reverse its precautionary interest rate reduction this month and sterling’s undervaluation has halved over the quarter.”
Bill Street, head of investments for EMEA at State Street Global Advisors commented, “Despite major waves in headlines, Brexit negotiations will likely have limited impact on markets until 2018 when the contours of a transitional and permanent agreement become clearer. Sterling in particular has risen from its lows earlier in the year. This partially reflects US dollar weakness but also greater than expected resilience from the UK economy and expectations of a rate rise by the BoE. However, it still remains undervalued against most currencies and is likely to continue to show volatility while Brexit uncertainty remains.”
To view the full research report, click here.
1 State Street Brexometer Index is a quarterly survey conducted by PollRight on behalf of State Street. For the Q4 2017 survey, 100 institutional investors participated globally during 27th September 2017 and 10th October 2017. The research will be conducted on a quarterly basis using the same questions and database to best measure how sentiment towards Brexit is evolving.
2 For the Q1 2017 survey, 111 institutional investors participated globally during December 2016 and January 2017.
3 For the Q3 2017 survey, 103 institutional investors participated globally during June 2017 and July 2017.
4 For the Q2 2017 survey, 101 institutional investors participated globally during March 2017 and April 2017.
