Institutional investment managers have a more positive view of the U.S. economy than in previous quarters, according to a survey of 100 managers conducted by Northern Trust, but they remain concerned about the European debt crisis and other macro issues.
Half say they expect GDP growth to accelerate in the next six months in the U.S., compared to 29% in the fourth quarter last year. Furthermore, they are confident in corporate earnings, with more than three quarters anticipating earnings growth throughout the year. A third expect job growth to rise, while half say it will remain stable.
However, the managers said equity market volatility in Europe remained the biggest threat, followed by concerns in the domestic marketsuch as the upcoming elections later this year and the U.S. sovereign debt level.
Despite continuing concern about the situation in Europe, institutional investment managers saw more positive economic and financial market signals in the first quarter this year than they did at the end of 2011,” says Chris Vella, CIO for Northern Trusts Multi-Managers Solutions group. “For example, 40% of managers believe market volatility will decline from current levels. Lower volatility combined with lower correlations between equities should benefit bottom-up, fundamentally focused investment managers.”
Forty percent of managers surveyed believe correlations among equitieswhich reached record-high levels in late 2011will move lower in the next six months. Most managers believe equities in the U.S. and in emerging markets remain attractively valued, with 60% seeing an upside in emerging markets in particular. Their outlook was less positive for fixed income investments and the utilities and telecom sectors.
Each quarter Northern Trust polls fixed income and equity managers across value and growth styles on their market sentiments.
(CG)