Every quarter, the Wellington Investor Survey team polls around 100 of our Wellington colleagues across different investment disciplines and locations to get their views on what they see as the key macro questions of the day. The results can pinpoint where the firm’s views differ from the consensus and can also reveal important shifts in our collective thinking.

Given the current uncertainty about the economic outlook, we wanted to see what our survey respondents thought about the global cycle outlook for the next 12 months. As Figure 1 shows, growth concerns are rising, with the views on the cycle mix in our August survey including a 45% recessionary phase over the next 12 months. This compares with fewer than one third giving the highest weighting to that option when we conducted the survey in May. While August’s survey shows that the second-most likely phase remains the late cycle, based on our respondents’ views, the likelihood of this outcome has shifted meaningfully since May.

Interestingly, we also saw a slight uptick in the likelihood of the early cycle phase, suggesting we may be approaching the beginning of a new cycle.

Increasing pessimism over the global economic outlook reflects the challenging environment of rising inflation amid an economic slowdown, and the resulting concerns over the growth implications of central banks’ inflation-induced policy tightening. The risk to interest rates for the foreseeable future appears to be to the upside, and whether policymakers can bring inflation down to a comfortable level without sparking recession remains a pressing concern for our respondents and for investors more broadly. Against this backdrop, our survey respondents remain mildly bearish towards risk assets.

Superforecasting in practice

Wellington’s recurring macro survey originated from a conversation three of our macro thinkers had over six years ago about Philip Tetlock and Dan Gardner’s book Superforecasting. Tetlock and Gardner argue that forecasting is a skill which can be improved, and we thought their theory could work well in practice at Wellington, given the firm’s collaborative culture. The hope was to sharpen our collective and individual forecasting skills, enhance our internal investment dialogue, reveal where our views differ from the market consensus and identify how they change over time.

In January 2016, we launched an internal survey of macro thinkers across all disciplines, asset classes and office locations. The responses are anonymous. The precise formulation of the questions is important. Wherever possible, they are precise, time-bound, measurable, probabilistic and rollable from one quarter to the next, giving us a richer data set over time.