GO
Loading...

Only 7% Believe in Goldilocks: Survey

Only seven percent of investors believe in the goldilocks scenario of contained inflation and solid economic growth, following the upheaval in the Middle East, according to a survey of investors by Barclays Capital.

“Sixty percent thought that the biggest change in the investment outlook since December was the political upheaval in the Middle East,” said Piero Ghezzi, the head of emerging markets economics and FX research at Barclays Capital.

Those same investors said the most underpriced risk facing the financial market is the prospect of a hard landing in China, while most believe the Federal Reserve will tolerate higher inflation, with only 22 percent of investors predicting Fed tightening in 2011.

“Percentages reverse when it comes to the (European Central Bank) and the (Bank of England): only 22 percent of investors believe that economic fundamentals do not warrant tightening by the ECB and the BoE this year,” Ghezzi said.

No Euro Zone Break-Up

As investors prepare for this week’s EU heads of state summit, which is likely to produce a deal on the size of the European Financial Stability Fundsfinancial firepower, the survey indicated half of investors are preparing for a euro zone default.

“Only two percent of investors believe that the current European debt problems will end up in a full-blown crisis that could include the break-up of the euro,” Ghezzi said.

“Fifty percent of investors believe Greece, Ireland and Portugal will restructure/default within the next three years,” he added.

The survey found the majority of investors believe stocks and commodities will continue to outperform, with an oil price shock seen as the biggest risk for stocks.

“Among equity investors, more than 40 percent believe the main catalyst for a potential correction is an oil price shock; while 21 percent consider central banks’ exit strategies are the main risk” Ghezzi said.

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More

Europe Video

  • The FBI have stated that North Korea's government is responsible for the Sony attack. Neil Ashdown, deputy head of Asia analysis at IHS, weighs in, saying that it's difficult to "definitively attribute" a hacking attack to a particular group or state.

  • What were the main highlights of the EU Summit in Brussels? CNBC's Hadley Gamble gives you the lowdown.

  • Carnival Cruises earnings have beaten expectations in its fourth quarter, with lower fuel prices being a great help, says David Dingle, UK chairman of Carnival Cruises.