As the final quarter of 2024 approaches, Copenhagen-headquartered Saxo, an investment bank specialising in online trading and investment, has conducted another survey of its clients, revealing a shift in market sentiment compared with previous quarters.

The latest Saxo Client Sentiment Survey indicates that investor confidence in global equity markets has softened. While many respondents remain optimistic, there is growing concern over inflation, interest rates, and geopolitical risks, all of which continue to shape market expectations for the next three months.

In particular, the fourth quarter survey shows that equity market sentiment has weakened, with fewer expecting significant gains. It reveals a dip in optimism regarding global equity markets compared with the previous quarter. A smaller portion of respondents (40.6 per cent) expect markets to increase, compared with 42.1 per cent in the third quarter and 50.5 per cent in the second quarter, whilst 8.4 per cent expect a big decrease, compared with 2.4 per cent in the third quarter. This caution among investors reflects the growing uncertainties surrounding economic conditions, with geopolitical tensions and inflation topping the list of concerns.

“We’re seeing a greater division of clients’ conviction about the markets, which makes sense given the increase in geopolitical risk and the upcoming US election in November,” Peter Garnry, chief investment strategist at Saxo, said.

With the growing unrest around the globe, geopolitical tensions have established themselves as the biggest worry among investors, according to the survey. Similar to the last quarter, the US election and interest rates are the second and third biggest worries.

“The sustained concerns about geopolitical tensions align with ongoing global conflicts and economic sanctions, while rising interest rates and inflation remain key risks for global markets. We also get closer to the US election – now less than a month away – and as such it seems relevant that geopolitical tensions, the election and interest rates are among investors' top concerns,” Garnry added.

Despite the recent setback for the US tech sector, Saxo clients continue to view information technology, energy, and healthcare as the top performers. Information technology garnered the highest confidence, with 20.6 per cent of respondents predicting it will be the best-performing sector in the fourth quarter, while energy garnered 11.5 per cent, and healthcare was seen as the best performer among 10.1 per cent of respondents, the survey reveals.

“Interestingly, while information technology remains chief in this survey, we see that it has fallen quite drastically relative to the second and third quarter responses, which were both +30 per cent,” Garnry continued. “The underperformance in US technology stocks in the third quarter has likely contributed to this. It is also odd to see the low conviction in utilities given it has been the best performing sector the past three months.”

When asked which region would be the best performer in the fourth quarter, the majority of clients (49.3 per cent) pointed to North America, which has been the case for the past two quarters as well. Only 12.1 per cent of respondents thought Europe would be a top performer in the fourth quarter, compared with 22.4 per cent in the third quarter. The figure reached 16.7 per cent for the Asia-Pacific region in the fourth quarter, up from 14.3 per cent in the third quarter. Meanwhile, it reached 12.8 per cent for emerging markets in the fourth quarter, up from 7.7 per cent in the third quarter.

Europe was also voted – by 47 per cent – as the expected worst region for the final quarter of 2024, compared with 11 per cent in the US, 15.2 per cent in the Asia-Pacific region and 15.3 per cent in emerging markets.

“The classic narrative about American exceptionalism seems to remain strong despite increased worries about the US budgets, the election etc. Benchmarking this year’s performance from the US S&P 500 index and the EU EUROSTOXX 600 index, the American companies also outshine the European ones with almost three times as high a return. Whether it continues in a quarter where the US will be on everybody’s radar remains to be seen,” Garnry continued.

Saxo also noticed a tendency for younger investors to be more optimistic than their more senior counterparts. As such, the 18 to 35 age group is the only one where more than half of the respondents expect either an increase or a big increase in the coming quarter.

The survey, which was distributed to Saxo clients between September 23 and October 4, 2024, consisted of 712 respondents. The survey was executed in English, French, Dutch and Danish and sent to clients in the respective language markets.