Between May 13 -15th, Deutsche Bank conducted its seventh monthly market sentiment survey covering 450 market professionals across the world, in which questions emphasized the covid-19 pandemic around the working from home (WFH) experience as well as also people’s thoughts on the duration of this pandemic, and how that will impact various parts of their lives as well as how market expectations have evolved.
In terms of WFH it seems that more people are getting comfortable with this being a more regular feature post covid relative to last month. 57% (39% last month) think they’ll do 1-3 days per week WFH in a post-covid world. Those thinking they’ll only do it when they need to has dropped to 31% from 47% last month.
According to DB's Jim Reid, "this reflects an improvement in productivity in month two of shutdowns. We’ve seen the net balance of more productive vs less productive WFH increase from -13% to +7%. The amount who claim to be as productive or more productive WFH has gone up from 58% to 69%." This may reflect IT departments getting more able to handle the vast increase in traffic and end users ensuring their set-up has improved. However, 31% say they are less productive WFH (42% last month), so it’s not for everyone.
The survey reveals an age bias: under 34 year olds were net -5% more productive at home. For 35-44yrs this was flat (0%). For 45-55 yr olds (+19%) and over 55 yr old (+15%) the pendulum swings to them being more productive. This is perhaps a reflection of younger people more likely to live in smaller city flats with less space for an optimum set up. They may also require more mentoring and guidance to thrive. The answer may also be skewed to whether people have young kids at home at the moment? Interestingly across all ages the answer “I am far less productive at home” only received 2-5%. I am “far more productive” saw answers of 12-18% across the ages.
The under 34-year-olds are also the one group most likely to review where they live as a result of covid-19 but on balance they are just about net (+1%) happy with where they live. The older we get, though, the less likely we are to reconsider where we live due to the virus with this peaking forv45-55 year olds (-25%). Urban dwellers of all ages are neutral on balance (0%) as to whether covid-19 will make them assess where they live. Suburban (-22%) and Rural (-46%) dwellers are far less inclined to review where they live post covid-19 though.
In terms of the virus, people are generally optimistic (74%) on a vaccine being available within 18 months even if only 5% think within six months. Only 4% think that we’ll never see one. 48% think social distancing will only last for the next 6 months with a further 30% thinking an extra 6 months on top.
A net 55% agree with Lloyd Blankfein that there will be a second wave of the virus and a net 58% agree with shielding the elderly and those with underlying conditions and trying to restart the economy prior to a vaccine being available. Unsurprisingly a net 67% of under 34 year olds agreed with this compared to a net 24% for over 55 year olds.
Some good news: in month two of lockdown it seems people are getting healthier relative to month one. Exercise is up on pre-covid levels now with +12% doing more than they were pre-lockdown (-1% balance last month) and whilst alcohol consumption is up (+6%), it's less than it was last month (+12%). People are still eating more food (+20% balance) but it’s less than last month (+27%).
Moving to our more markets-based questions, people still think the covid crisis will be inflationary (47% to 40%) but this has narrowed relative to last month (53% to 32%).
Now that there are seven months’ worth of data on S&P 500 expectations, Jim Reid was able to see how net expectations measure matches up with market performance through the survey history period. 3-month expectations were closely aligned with price action into the market decline during March but seem to not have caught the rebound through April and so far in May. 12-month expectations had been roughly the inverse, but we have seen long-term expectations roll over this month along with the short-term views.
Given the recent rally in equities and lack of improving economic data in Europe and the US, sentiment has gotten more bearish in the last month, especially in the short term. A majority (42%) see equity prices slightly lower over the next 3 months for the S&P 500 and Stoxx 600, before improving over the next 12 months. However, it is the lowest net higher expectation for the S&P 500 since February as ‘only’ 13% on balance believe the index will be higher a year from now, down from 47% two months ago as the crisis was causing the first big dip in markets. Respondents were torn on 12 month expectations for the Stoxx 600, with an equal number thinking the index would be higher or lower.
With Treasury yields near all-time lows and further conversations over negative US rates (even as they are opposed by the Fed), expectations lean toward US core rates falling further over the next 3 months (37% vs 17% to rise) but then rising again over 12 months (45% rise against 28% lower). Similarly bund yields are expected to fall by 28% of respondents over 3 months (14% rise), but over 12 months, 38% expect a rise against only 23% expecting further falls.
There continue to be fairly strong expectations that Italian yields to bunds will widen over the next 3 and 12 months. Net 34% expect wider spreads in 3 months, the most one-sided that short term expectations have been in 5 months of asking. Meanwhile, a net 26% expect wider in 12 months. In terms of Italy being in the Eurozone in 5 years, 14% think it won’t be, which is up from 7% when first asked back in November last year. The budgetary pandemic shock is certainly knocking confidence on this measure.
Finally, with the US election just under 6 months away, a net of 23% believe President Trump will receive a second term, though respondents continue to become steadily more bearish on his re-election chances. Our survey has always heavily favored Trump’s electoral chances but more and more doubts are emerging. The economic fallout of covid-19 and the country’s lingering and sizeable case numbers seem to have dulled any polling bounce Mr. Trump received at the beginning of the outbreak. This is the lowest that respondents have thought his re-election was “extremely likely”. This is now at 14%, having peaked at 63% in February.