Investment managers are heading into the second quarter optimistic the US economy will strengthen despite expected weakening in emerging markets and political turmoil in Ukraine.
About 97 percent of US investment managers expect US gross domestic product growth to accelerate or remain steady over the next six months, while 95 percent believe corporate earnings will increase or remain stable, according to a survey conducted by Northern Trust.
At the same time, only 11 percent of managers surveyed say financial market volatility and slowing economic growth in emerging markets carry a ‘significant’ risk of contagion in the US and other development markets, the results show. The other 89 percent say they perceive the chances of contagion to be less than 25 percent.
‘Managers are wary, but still optimistic, with a positive view of US economic fundamentals,’ says Christopher Vella, chief investment officer for multi-manager solutions at Northern Trust, in a media release. ‘Managers expect US GDP, corporate profits, housing prices and jobs to continue to improve, and that confidence appears to outweigh their concerns about geopolitical risks like the Ukraine-Russia conflict and the slowdown in emerging markets’ economic growth.’
The number of investment managers who predict rising interest rates over the next three months dropped to 48 percent at the end of the first quarter compared with 66 percent in the survey at the end of the fourth quarter of 2013, Northern Trust says. At the same time, the number predicting increased market volatility rose to 70 percent from 64 percent.
The managers are most positive about the outlook for IT sector stocks, with 58 percent rating themselves as ‘bullish’ and 10 percent as ‘very bullish’. They are most pessimistic about the outlook for utilities, with 67 percent describing themselves as ‘bearish’. About 64 percent of managers see emerging market equities as the most undervalued in the latest survey, up from 57 percent in the survey conducted in the fourth quarter of last year.
