The Ukraine War has sent international markets roiling and investor morale spiraling, just as the global economy appeared ready to rebound from the stagnant years of the pandemic.
Investor confidence in the eurozone is now at the lowest it’s been since the early days of the pandemic in July 2020, according to a new survey by the Germany-based Sentix economic indicator.
Even worse, it finds that a worldwide recession is just around the corner, and Europe will be hit first and hardest. But there’s an even worse finding tucked into the survey.
Morale also fell in the U.S. and Asia, and while the economic outlook in these regions is higher than the global average, economic performance forecasts in every part of the world are all trending negative.
Investors have low morale right now
For 20 years, Sentix has produced weekly and monthly assessments of global economic morale based on thousands of investor responses. It calls itself the “leading provider of behavioral finance data and consulting in Europe.”
For this indicator, it surveyed the attitudes of over 1,200 investors in the first few days of April on their outlook toward specific regions and countries. Morale dropped most precipitously in Europe, where investors have grown skittish about the ongoing war—which shows few signs of abating any time soon—and the consequences of Western sanctions cutting Russia out of the global economy.
Europe is bearing the brunt of the confidence collapse, but other parts of the world are all following the same pattern.
“Internationally, the declines are smaller, but the trend is the same everywhere,” the survey authors wrote.
Investors surveyed by Sentix said that the war, sanctions, and their effects on slowing down the global logistics industry are sparking fears of an international economic shrinkage. Analysts at Sentix say that an economic recession could begin hitting parts of Europe as early as this month.
But then it gets to the truly scary part.
The survey says that uncertainty as a result of the war will combine with global inflation to create a new type of economic crisis that is largely without precedent. In times of market uncertainty, an option for central banks is to loosen their monetary policy and create more demand. But because of pandemic-infused inflation, which in the U.S. has been branded a “top economic priority” by President Joe Biden, a more expansive monetary policy is simply not an option. The Fed has already begun hiking interest rates in an effort to reduce aggregate demand and bring prices down.
“For many investors, this is a new experience with its own risks,” the survey said.
