Institutional investment managers are becoming more cautious, with 42% saying they became more risk-averse in the second quarter, up from 35% in the first quarter, a survey of 100 managers in June by Northern Trust found.

Nonetheless, nearly three-quarters, 72%, are optimistic about the prospects for job growth and a majority, 56%, expect corporate earnings to continue growing in the short term. Forty-six percent said they expect gross domestic product growth to accelerate in the second half of the year, up from 39% in the first quarter.

However, in the first quarter, 69% expected U.S. GDP to accelerate.

“It appears that our managers are becoming increasingly concerned that economic growth may be hitting a soft patch, a view that we’ve seen reflected in their more cautious approach toward risk,” said Chris Vella, global director of research for Northern Trust’s multi-manager investment solutions business. “Although their general outlook remains favorable for the remainder of the year, the mixed signals coming from the economy seem to have slightly recalibrated their expectations.”

The survey also found that 59% believe that the U.S. equity market, as measured by the S&P 500 Index, is undervalued. On the international front, the market the managers see as the most attractive is Japanese equities, with 60% citing this as a good opportunity. However, this enthusiasm is down from the 66% who said Japanese equities were a good opportunity in the first quarter.

Thirty-seven percent believe emerging market equities are fairly valued, up from 27% in the first quarter. Fifty percent think that home prices will decline in the next six months, up from 42% in the first quarter—and the highest level since the second quarter of 2009.

Thirty percent of managers said their commodities exposure was lower in the second quarter than it was in the first quarter, which may signal slowing demand for commodities and slowing economic growth.

Asked what they thought the three most attractive market segments for investment in the second quarter, the managers cited technology, consumer discretionary goods and healthcare.

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