Global equity correction expected by investors

Research has found that 71% of institutional investors expect there to be a global equity market correction of more than 10% within 18 months, with nearly half expecting it within a year.

Researchers at Managing Partners Group found that almost a third of investors who anticipate an equity correction expect it to be up to 30%, while 36% think it will be between 10% and 15%. The most likely reason seen for a run on equities is a fear that they are overpriced, cited by 37%, ahead of a black swan event (33%), a geopolitical crisis (27%) a rise in interest rates (25%), or a financial crisis in China (24%).

In terms of defensive measures taken, a fifth of investors have already adjusted their portfolio and another 37% plan to do so. Among investors taking action, 90% have reduced their equity exposure and 30% have cut fixed income exposure. In addition, 40% have allocated more to cash, 50% to hedge funds and 40% to real estate.

Managing Partners Group chief executive officer, Jeremy Leach, commented: “Equities are looking highly valued on both sides of the Atlantic and it looks as though the market is just looking for an excuse to correct. Our research shows that a substantial proportion of investors now expect this to happen and many have already reduced exposure to equities while looking at alternatives.”