Northern Trust Global Advisors Survey Of Investment Managers Reports On US Equity Market

In a sign of continued market uncertainty, a poll of investment managers conducted by Northern Trust Global Advisors (NTGA) found a large majority, regardless of investment strategy, expect corporate earnings to drop and global growth to decelerate in the short

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In a sign of continued market uncertainty, a poll of investment managers conducted by Northern Trust Global Advisors (NTGA) found a large majority, regardless of investment strategy, expect corporate earnings to drop and global growth to decelerate in the short term. The survey did reveal some bright spots within the US equity market, most notably in the healthcare, technology and energy market segments.

The survey of more than 75 institutional managers was conducted by NTGA, the multi-manager subsidiary of Northern Trust. Respondents, all of whom participate in NTGA’s external manager platform, were polled at the end of September. NTGA carried out its initial poll in June 2008 and intends to conduct the survey each quarter. Major findings from the September survey include:

* 86% of participants believe that corporate earnings will decrease over the next 3 months.

* In a marked change from the previous quarters survey, 49% believe that US interest rates will remain the same over the next 3 months; 23% expect rates to rise and 28% anticipate lower rates. In contrast, 84% of managers in the previous quarter believed that US interest rates would remain the same, while 8% expected rates to rise and 8% anticipated lower rates.

* 87% of respondents expect global growth will decelerate through the end of 2008.

* In a sharp turnaround from the previous quarter, 54% expect global inflation to decrease. In the previous quarter, prior to the September market turmoil, 85% believed that global inflation would increase or at least remain the same through the remainder of the year.

* 87% expect housing prices to decrease in the next six months and 13% expect housing prices to remain the same. No respondent believes that housing prices will increase in the next six months.

* Despite this generally negative sentiment, managers are still finding attractive investing opportunities, with 60% of participants believing that the S&P 500 Index is undervalued. At mid year, only 46% of the participants felt that the index was undervalued.

* Out of a range of various investment options, managers overwhelmingly favored the US large cap and US small cap asset classes, specifically citing health care, technology, and energy sectors as their preferred market segments.

“Given the current market environment we should not be surprised about the consensus on corporate earnings, housing prices, and other major, global indicators over the short term,” says Andrew Smith, chief investment officer for NTGA. “In light of recent market turmoil, this survey provides interesting insight as to where a large proportion of managers see potential opportunities and risks.”

For its survey, NTGA polled a select group of respondents, including fixed income and long-only equity managers across value and growth styles. The quarterly poll is intended to help NTGA and participating managers examine trends in attitudes and allocations.

This survey leverages the experience of the investment managers in our database and generates valuable information that managers and our clients may use in making investment decisions, says Christopher Vella, global director of manager research at NTGA.

D.C.

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