Apr 29, 2020 - Economy & Business

Investors stay bullish on stocks as business confidence fades

Dion Rabouin, author of Markets

Illustration: Aïda Amer/Axios

As the coronavirus pandemic persists, a divide is growing between stock investors and business owners.

The state of play: Wealthy investors remain confident about the future and their stock portfolios, while business leaders are growing increasingly worried, new surveys show.

Driving the news: A study released today from asset manager UBS finds almost six in 10 wealthy U.S. investors (58%) plan to keep their stock allocation at the same level in the next six months, while 37% plan to invest more.

  • About 35% say they are bullish on U.S. stocks over the next six months, and 40% believe coronavirus' worst impact will be over by the end of June.
  • Just 58% think a global recession is highly likely in the next 12 months, despite expectations for the worst global downturn since the Great Depression from organizations like the IMF, the World Bank, OECD and others.

What we're hearing: "Although the level of optimism over the near-term outlook has declined fairly sharply, those looking to increase their market exposure over the next six months outnumber those looking to reduce exposure by a ratio of more than 2 to 1," Mike Ryan, Americas chief investment officer at UBS Global Wealth Management, tells Axios.

On the other side: The rosy views of investors run counter to a recent survey by PwC of American business leaders, who continue to downgrade expectations for their own companies and the broader economy.

Details: In its latest survey of top CFOs, the global accounting firm found 80% expect revenue/profit losses this year, while more than half (53%) expect losses will be greater than 10%, and about a quarter (24%) said they expect losses will be greater than 25%.

  • A third (32%) expect layoffs to occur in the next month, up from 26% two weeks ago and double the percentage who expected to lay off employees at the end of March.
  • 70% say they are considering deferring or canceling planned investments and 56% say they are changing company financing plans, up from 46% two weeks ago.

Between the lines: CEO expectations also have declined markedly, with the Conference Board's latest survey of top executives showing confidence at its lowest since the height of the Great Recession.

  • "[W]hile CEOs see brighter days ahead, they also expect to experience major consequences from the current crisis," Conference Board chief economist Bart van Ark says.
  • "For example, workers, profits, sales, and investment activity will all take a hit, and such impacts could endure post-crisis."
Data: PwC; Chart: Axios Visuals

Business leaders are using the pandemic to reimagine the workplace for a post-COVID-19 world.

  • What they're saying: "If there is some relative upside here for companies, it's that despite the fact that the crisis may be accelerating disruption across many industries, we’re seeing many companies using this crisis to think differently about remote working, to grow into their technology and digital strategies, and to digitize not only the workforce experience but also the customer experience," Amity Millhiser, PwC's chief clients officer, said during a recent media briefing.

By the numbers: 49% of companies say they’re planning to make remote work a permanent option for some roles.

  • 40% say they plan to accelerate automation and "new ways of working."
  • 26% say they plan to "reduce their real estate footprint."

Methodology: UBS surveyed 908 investors in the U.S. with at least $1 million in investable assets between April 1-20, while PwC interviewed 305 CFOs at U.S. companies during the week ended April 22.

Go deeper

Unemployment rate falls to 13.3% in May

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. unemployment rate fell to 13.3% in May, with 2.5 million jobs gained, the government said on Friday.

Why it matters: The far better-than-expected numbers show a surprising improvement in the job market, which has been devastated by the coronavirus pandemic.

Updated 31 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 6,724.516 — Total deaths: 394,018 — Total recoveries — 2,996,832Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 1,894,753 — Total deaths: 109,042 — Total recoveries: 491,706 — Total tested: 19,231,444Map.
  3. Public health: WHCA president says White House violated social-distancing guidelines to make reporters "a prop" — Jailing practices contribute to spread.
  4. Sports: How coronavirus could reshuffle the sports calendar.
  5. Jobs: Better-than-expected jobs report boosts stock market.
  6. Media: The Athletic lays off 8% of staff, implements company-wide pay cut.

Scoop: German foreign minister to travel to Israel with warning on annexation

Heiko Maas. Photo: Michael Kappeler/picture alliance via Getty Images

German Foreign Minister Heiko Maas is expected to travel to Israel next week to warn that there will be consequences if Israeli leaders move forward with plans to annex parts of the West Bank, Israeli officials and European diplomats tell me.

Why it matters: Israeli and European officials agree that if Israel goes ahead with unilateral annexation, the EU will respond with sanctions.