Uncertainty caused by last-minute congressional negotiations to avert the fiscal cliff created pessimism about the economy and markets in the short term, according to Pension & Investments readers responding to a P&I/Oxford University survey.
There was less pessimism about the longer-term implications.
The responses also highlighted a difference between individuals' beliefs about market behavior and their perceptions of how the market would react over different time horizons. That split underscores a significant shift in market theory and practice since the 2008-2009 financial crisis, according to the authors of the survey.
The survey on the current state of institutional investors' long-term investment beliefs was conducted Dec. 17-24 by P&I and Oxford University professor Gordon Clark, director of its Smith School of Enterprise and the Environment. Dane Rook, a Ph.D. student in long-term investment at Oxford, was responsible for the survey design and data analysis. Respondents were polled on their views and their views of others in the market for both short and long horizons pertaining to economic stability, economic growth, unemployment, international trade and consumer confidence.
The 811 survey respondents represented roughly equal proportions of asset owners, money managers, consultants and others.
The eight-question survey found a divergence between individuals' views of how the fiscal cliff affected the market and individuals' perceptions of the market's view of the same issue.
Mr. Clark attributed the difference to the financial crisis, which “has opened a gap between how individuals see the world, and their perception of market beliefs. The crisis has forced sophisticated investors to look at their own beliefs more in relation to others' beliefs.”
The survey also found no meaningful link between respondents' political affiliations and the time horizons, but people self-identified as Republican were more pessimistic about how Congress' fiscal cliff action would affect the economy and those self-identified as Democrats were less pessimistic. One-fourth of respondents did not identify with either party.
Across political affiliation and organization type, the definition of short term as predominantly “three months to less than one year” was consistent, with 70.8% of all respondents agreeing on that period. Another 17.3% considered short term to be one month to less than three months, and 11.2% saw it as one year to four years.