Following meetings with clients in the US, Europe and Asia over the past few weeks, we make the following observations:
1) Confusion;
2) Growth pessimism;
3) China concerns;
4) QE not working and has run out of steam;
5) Two new concerns often cropped up (the $0.5trn decline in global FX reserves, the rising political tide against profits);
6) Regional views: Pessimism on GEM equities is extreme, except in Asia. Investors are happy to stick with Europe (growth, low margins, QE-friendly ECB), but have largely capitulated on Japan (too exposed to China and leveraged to global GDP);
7) The recent rotations have hurt the majority of investors;
8) What was not mentioned: Eurozone politics, US debt ceiling, Russia's involvement in Syria or the UK referendum on the EU.
In sum, we think clients are focused more on risks, which are abnormally high, rather than reward, which is also high.