A majority of institutional investor, 55%, expect global growth over the next six months, up considerably from the 33% who felt this way in the third quarter, a survey of 97 institutional managers by Northern Trust found.

In addition, 80% expect corporate earnings to rise in the next three months, and 58% think stocks in the S&P 500 Index are undervalues.

As a result of this growth, 62% expect inflation to rise over the next six months, up from 20% who thought so in the third quarter. And 53% expect interest rates to increase in the next three months, up from 20% in the third quarter.

“In the fourth quarter, our managers expressed optimism that global markets are on solid footing and will perhaps continue their upward trajectory,” said Chris Vella, global director of research for Northern Trust Global Advisors.

“As we might expect, however, with growth comes the risk of increased inflationary pressure and the potential for rising interest rates,” Vella added. “It appears that our managers have also sounded a note of caution around these two important measures.”

Fewer institutional managers, however, think that emerging markets are highly attractive, with only 39% thinking emerging markets equities are undervalued, down from 59% who thought so in the third quarter.

“Our managers are continuing to find investment opportunities throughout the U.S. and international markets,” said Harry Phinney, an investment analyst with Northern Trust. “However, with regard to emerging market equities, the recent strong relative performance in the segment may be boosting valuations to levels that our managers feel are somewhat less compelling when compared to other markets.”

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