89% of investors believe that the Chilean economy is unlikely to enter a recession

This is a machine translation of the original release issued in Spanish

PRESS RELEASE from CFA Society Chile and Adolfo Ibáñez University
September 2024

● The survey revealed that two out of three investors have expectations of lower inflation over the next 12 months.

● A “global economic recession” is the main risk perceived by investors, followed by “geopolitical risks” and “management of global politics.”

Santiago, September 2024.- CFA Society Chile and the Adolfo Ibáñez University Business School announced the results of the Asset Management Survey for the third quarter of 2024. The survey seeks to gather the main economic expectations, risks and strategic vision of investment managers in Chile.

According to the survey, 89% of investors consider it “quite unlikely” or “very unlikely” that the Chilean economy will experience an economic recession in the next 12 months. In contrast, only 11% consider it “quite likely” that such a scenario will occur.

“This is the third consecutive quarter in which more than 80% of investors believe that a recession scenario in the next 12 months would be unlikely. In short, this option has been consolidated throughout 2024,” says Hugo Aravena, president of CFA Society Chile.

As for inflation , 66% of investors expect it to be “much lower” or “slightly lower” in the next 12 months, which corresponds to an increase of 7 percentage points compared to the previous quarter. On the other hand, 34% estimate that inflation will “stay” within the current ranges, or will be “slightly higher”, falling by 9 percentage points.

Asset classes and local stock market

In this edition, investors maintained their optimistic outlook towards equities (EV). In the case of Chilean EV, respondents expressed a favorable or very favorable expectation of 67%, registering an increase of 16 points compared to the previous quarter. On the other hand, 39% (-10 pp) have optimistic expectations towards Emerging EV and 52% (-5 pp) towards Developed EV.

The optimism regarding local equities was also reflected in perceptions regarding the performance of the IPSA. 54% of managers expect that in the next 12 months the performance of corporate profits of the index will be superior, compared to the results of the last 36 months. The figure corresponds to an increase of 10 percentage points compared to the previous quarter.

On the other hand, two thirds of those surveyed (64%) consider that the IPSA stock market is undervalued, while 36% believe that the index is adequately weighted. The perception of overvaluation was zero.

“Perceptions towards the IPSA are interesting. We can see that the favorable sentiments regarding the profits of the companies in the index have been consolidated, in addition to a strong change in the perception of the local stock market since the last survey. To put it into perspective, in the previous quarter 35% of investors believed that the index was undervalued, a figure that almost doubled in this edition,” says Aravena.

Another revealing fact relates to the alternative asset classes of international markets that investors prefer. In this edition, Private Equity scored 7% (-16 pp), Private Debt 71% (+11 pp), Hedge Funds 4% (+1 pp), Real Estate 7% (+7 pp) and Infrastructure 11% (+2 pp).

Tail risks and “The Magnificent 7”

Regarding the most important tail risks for local investment assets, the “global economic recession” option moved up to first place with 28%, rising 23 percentage points compared to the previous quarter. “In our opinion, the risk of a global recessionary economy rose exponentially due to the fall in global stock markets recorded in August,” explains Pablo Castañeda, professor at the UAI Business School.

The second most important tail risks were “geopolitical risks” with 17% (-16 pp) and “management of global monetary policy” with 17% (+7 pp). In last place was “presidential elections (US, UK, India)”, which did not change from the previous survey and scored 3%.

On the other hand, the CFA Society Chile/UAI Asset Management Survey surveyed investors' views on the future performance of the "Magnificent 7 " following the high returns presented. In this regard, 28% indicated that they "will continue to invest in them since they will offer a performance superior to the market." On the other hand, 33% believe that these stocks "will present a performance more similar to the S&P 500," and 31% indicated that they "prefer to invest in the remaining companies in the index."

About CFA Society Chile

CFA Society Chile is an association of 200 investment management professionals in Chile, founded in October 2015, which promotes a financial industry that contributes to the development of the country, with the ultimate goal of benefiting society as a whole.

CFA Society Chile is part of CFA Institute, a global non-profit organization that provides the most rigorous and prestigious certification for financial analysts worldwide.