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Pro investors heavily favour S&P 500 vs FTSE for 12 month gains


Professional investors expect stronger growth from the S&P 500 over the year ahead compared with the FTSE-100, new research from blockchain-based derivatives trading platform CloseCross shows.

The research by CloseCross, which is regulated under MIFID II rules, among professional investors around the world responsible for around $380 billion in assets under management found 70.3% expect the S&P 500 to be higher in a year with 15.8% forecasting it will be significantly higher.

The study with professional investors including hedge funds, wealth managers, institutional investors, fund managers and IFAs, found strong support for the FTSE-100’s performance but only 57.4% believe it will rise over the next year.

Around 16% – the same number for the S&P 500 – expect the FTSE-100 to be significantly higher next year, the study found.

Not everyone is bullish

The research with professional investors found not all of them are positive about the future for the two major indices – around 9% expect the S&P 500 to fall over the next 12 months while 14% are expecting a correction for the FTSE-100.

CloseCross CEO, Vaibhav Kadikar, said: “There is strong support from professional investors for growth in the S&P 500 and the FTSE-100 with the S&P the favourite for the year ahead. That won’t necessarily mean that the indices rise every month or week and that offers opportunities for traders.”

There are going to be a number of factors that will impact the performance of both indices over the next 12 months. Foremost among them is going to be inflation in the US and also the impact of the finalised infrastructure spending bill, intended to boost the US economy after the COVID pandemic.

Covid impact versus Brexit impact

Economists are also finding it hard to assess the impact of Brexit on the UK economy, again largely because of COVID, which has cloaked the long term macroeconomic factors.

While the FTSE 100 is not really reflective of the UK economy, many traders still regard it as a proxy of some sort.

One potential fillip for FTSE 100 investors is the fact that many big UK companies are now seen as undervalued and potentially subject to bidding wars as corporations swoop on what many see as once in a generation buying opportunities.

Analysis from Schroders indicates that on average, UK companies are undervalued by around 30%, leading to a rush for takeovers and mergers including these UK firms. Refinitiv further found that in 2021, buyouts of UK companies is up by 98% in comparison to 2019.

Covid is here to stay

Let’s also not forget the pandemic, which has played a huge role in asset prices during the last 18 months. The UK has been one of the most successful countries in rolling out an aggressive vaccination program and is being closely watched by the rest of the world. The return to levels of normality in the UK has created a positive surge in the economy.

There are ongoing worries in the US about the spread of the Delta variant in some states, and this could have an impact on consumer optimism. The University of Michigan consumer confidence index slumped 10 points in July, to its lowest level since 2011.

As the university said in its statement:

“There is little doubt that the pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion. Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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