CFA Institute

CFA Institute

December 12, 2013 08:00 ET

Investment Professionals Optimistic on Global Economic Growth in 2014, Concerned With Local Canadian Growth and Market Integrity

Annual CFA Institute survey finds increasing confidence in global economy, need for key reforms to strengthen financial system

NEW YORK CITY, NEW YORK--(Marketwired - Dec. 12, 2013) - Investment professionals worldwide report greater optimism over economic prospects for the coming year, but do not express confidence that the integrity of capital markets is improving, according to the CFA Institute 2014 Global Market Sentiment Survey (GMSS). Sixty-three per cent of CFA Institute survey respondents think that the global economy will expand in 2014, representing a significant shift in opinion over the previous two years, however more than half (54 per cent) point to a lack of ethical culture within financial firms as the factor that has contributed the most to the current lack of industry trust. The annual survey measured the opinion of 6,561 CFA charterholders and members; to review the complete report and survey results, visit www.cfainstitute.org/gmss.

"The number of members who expect the global economy to expand has nearly doubled in the last two years, however this is no time for those in finance to become complacent," said John Rogers, CFA, president and CEO of CFA Institute. "The survey reflects that investor trust has been eroded and in order for the financial industry to be an extraordinary force for good, we must embrace ethical behavior at all levels. As markets rebound, we are working to ensure that attention does not shift away from meaningful reforms that might restore investor trust and strengthen the financial system's ability to resist shocks in the future."

Investment professionals increasingly confident global and local economies will grow in 2014

  • Global economy expected to improve. Sixty-three per cent of all respondents expect the global economy to expand, up from 40 per cent from last year's survey. In Canada, 62 per cent said they expect the global economy to expand.
  • Less optimism about Canada's local market performance. In Canada, only 47 per cent of CFA Institute members surveyed say they expect the local economy to expand.
  • Canadians are split on the likelihood of a local financial bubble. While 43 per cent of respondents do not anticipate a financial bubble, the same amount (43 per cent) reported they do anticipate a financial bubble in 2014.
  • Marked increase in optimism for equities. Seventy-one per cent of all members this year identified equities as the asset class most likely to perform best, a big jump up from 50 per cent in 2013. In Canada 69 per cent of respondents identified equities as the likely best performing asset class for 2014.
  • United States and China continue to be considered the best investment opportunity, Brazil drops off list. Members rate the United States (26 per cent), China (10 per cent), and Japan and Germany (tied at 6 per cent) as the equity markets that will provide the best investment opportunity in 2014. In 2013 members similarly indicated that the U.S. (32 per cent) and China (17 per cent) would provide the best investment opportunities, with Brazil (10 per cent) a strong third choice.

Weak economic conditions and the end of quantitative easing bring uncertainty to local markets

  • Weak economic conditions seen as a risk to Canada. At 43 per cent, the biggest risk to the local market in Canada comes overwhelmingly from weak economic conditions, followed by excess regulation (9 per cent) and political instability at 5 per cent
  • Concerns for the end of quantitative easing. Sixty-eight per cent of members worldwide say they are concerned that the prospect of central banks ending quantitative easing will have a negative impact on their local market in 2014.

Members call for global oversight and local enforcement

  • Calls for improved oversight to build investor trust. More than one quarter (29 per cent) of global members say that the most needed action to improve investor trust and market integrity is improved regulation and oversight of systemic risk. This sentiment is stronger in Asia Pacific (40 per cent) than in EMEA (33 per cent) and the Americas (24 per cent).
  • Need for improved enforcement and governance cited in Canada. In terms of regulatory or industry actions most needed in Canada to help improve investor trust and market integrity, 33 per cent of Canadians said improved enforcement of existing laws and regulations followed by improved corporate governance practices (22 per cent).

Lack of ethical culture in financial firms eroding investor trust

  • State of integrity in global capital markets not expected to improve. As in prior years, over half of members (54 per cent) point to a lack of ethical cultures within financial firms as the factor that has contributed the most to the current lack of industry trust. This sentiment was higher in EMEA countries (61 per cent) than in Asia Pacific (56 per cent) and the Americas (51 per cent).
  • Mis-selling seen as a problem in Canada. The most pressing ethical issue cited by Canadian respondents is mis-selling by financial advisers (34 per cent). Only 25 per cent of global respondents saw mis-selling as a major problem. In Canada the second most cited ethical issue facing the local market was market fraud, at 17 per cent. This was lower than the 24 per cent of global members who cited market fraud as the most pressing ethical issue.

The annual CFA Institute Global Market Sentiment Survey seeks input from CFA Institute members to gather data on key market and economic issues in the coming year. The survey was conducted online from October 2 to October 17.

About CFA Institute

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion for ethical behavior in investment markets and a respected source of knowledge in the global financial community. The end goal: to create an environment where investors' interests come first, markets function at their best, and economies grow. CFA Institute has more than 117,000 members in 140 countries and territories, including 110,000 CFA charterholders, and 140 member societies. For more information, visit www.cfainstitute.org.

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