OPINION polls have taken a bit of a reputational battering in recent years. In Britain, they underestimated the strength of the No campaign in the Scottish referendum and failed to predict a Conservative majority in the 2015 election; while in America, polls underestimated Obama's margin of victory in 2012 and the Republicans' mid-term success in 2014. In economics, there is still a debate about the usefulness of surveys of consumer and business sentiment (relative to the hard data).

Polls of investor sentiment are generally seen as useful, if only as a contrarian indicator. If fund managers are bullish about emerging markets, that means a lot of good news is priced in. The risks are thus skewed; further good news is thus unlikely to have a positive effect on asset prices while bad news will have an adverse impact.

What determines investor sentiment is also interesting. Presumably this comes from a mix of their own analysis of economic data, conversations with the business in which they invest and the general tone of media coverage. (Some people use the number of times key words like "recession" and...Continue reading