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Aggregate sentiment among companies has now been worsening for five consecutive months, according to Fidelity International’s latest monthly analyst survey. 

Asia Pacific and in particular Japan are the two bright spots in an otherwise gloomy picture, led by a significant monthly drop-off in North America and a swing from positive to negative in China.

Consumer discretionary companies stand out as the month’s biggest losers, according to Fidelity’s analysts, with negative sentiment across the sector unsurprisingly concentrated in developed markets. One analyst, who focuses on European food retailers, reports: “Inflationary support for revenues is dissipating rapidly while cost inflation remains sticky. This is a bad environment for retailers given their thin profit margins. And consumers are still worse off despite the first real wage growth in a long time, thanks to ongoing disruption in the housing market (10-15 per cent increase in rents in the UK) and rising mortgage payments.”

Fidelity’s North America-focused consumer discretionary analysts were particularly dour: over 70 per cent noted a decrease in sentiment among their companies (compared with 40 per cent globally). Here too rising prices, and in particular increasing rental costs, are leaving a mark. One analyst reported that low-income consumers, which are more likely to be hit by rent hikes, were visiting restaurants less, although higher-income households had continued to eat out.

The beleaguered property sector, meanwhile, has driven the turn in sentiment in China. One fixed income analyst who focuses on privately-owned property developers reported a “significant decline” in the mood of managers among the companies he covers.

The picture does differ further up the quality spectrum. One equity analyst who focuses on high-quality (usually state-owned) developers with lower default risk reported a positive outlook for leading indicators among her companies and no change in sentiment between October and November.

Fiona O'Neill

Fiona O'Neill

Head of Cross-Asset Research Capabilities