Earnings prospects underpin investor optimism: S&P survey

The risk appetite of equities investors has climbed to its highest level since 2021, according to a new survey from S&P Global Market Intelligence.

In a research note, S&P reported that its latest survey of almost 300 investment managers at firms collectively representing US$3.5 trillion in assets under management found that risk appetites rose sharply in early May. The survey was carried out from May 7 to May 10.

Investors were “significantly more willing to tolerate risk in May as the group’s outlook on returns and most industry sectors turned positive,” it said.

S&P noted that the risk appetite reading reached its highest level since November 2021, and marked a stark turnaround from the negative risk appetite that prevailed in May 2023.

“Positive sentiment stems from the latest earnings season and signs of sustained corporate health even in a higher-for-longer rate environment, as well as the belief that both the U.S. and broader global economies will avoid recession,” said Chris Williamson, executive director with S&P Global, in a release.

The survey said shareholder returns and equities fundamentals were ranked as the two biggest drivers of equities returns in May.

“At the same time, investors believe that rate cuts remain possible later in the year, helping to sustain earnings growth — note that analysts have revised up their second-quarter earnings estimates in the light of progress seen so far this year,” Williamson said.

Investors had a positive outlook for nine of 11 sectors, led by the energy sector, S&P said. The tech sector enjoyed the largest improvement in sentiment for the month.

Conversely, investor confidence was weakest in the real estate sector, it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.