The II Fear Index: Investors Expect Long Lockdown

Asset allocators and managers have hunkered down for a slow recovery, according to II’s weekly poll.

Illustration by II

Illustration by II

Nearly three-quarters of institutional investors think it’s too soon to reopen the economy, according to this week’s II Fear Index.

The second weekly poll recorded only a slight uptick in the portion of investors who believe that governments should prioritize economic stability over public health (37 percent), compared to 34 percent in last week’s survey.

The remaining 63 percent said health should remain the top priority. This translated to continuing social distancing practices: Just 26 percent of surveyed managers and asset owners said that their country’s economies should be reopened as soon as possible, compared to 74 percent backing continued shutdowns.

Roughly two-thirds felt that politics had motivated federal economic responses to the coronavirus pandemic. Just over half said that their national governments responded inefficiently to the economic crisis.

[II Deep Dive: The II Fear Index: How Scared Are Institutional Investors?]

Economic recovery is likely to take some time, according to the II Fear Index. For instance, 62 percent of respondents expected unemployment — which grew at a record pace in the U.S. after businesses were shut down — to reverse slowly or very slowly. Twenty-two percent predicted a speedy recovery for the labor force, while the remaining 15 percent suggested employment levels would recover at roughly the same rate as other economic indicators.

Bond yields were similarly seen as likely to stay lower for longer, following the U.S. Federal Reserve’s move to a zero percent interest rate target in March. Just 15 percent of survey respondents projected a brisk recovery for bond yields, compared to 56 percent who believed bond yields would recover slowly or very slowly.

The economic indicator that institutional investors were least pessimistic about was the stock market. Thirty-four percent believed equity prices would recover quickly — slightly outweighing the 32 percent who expected a slow recovery.

But in general, investors sounded glum about the future economic prospects of their countries. Just 14 percent reported an increase in optimism, compared to 23 percent last week. Meanwhile, 43 percent said they felt less optimistic about their economic futures — a slight decrease from 45 percent last week. The remaining 43 percent said their expectations had not changed over the 7-day period.

More results from the II Fear Index poll continue below.