Eighty-three percent of the 60 institutional managers that Northern Trust surveyed expect corporate earnings to increase in the third quarter, and 84% expect the world economy to improve.

Seventy-six percent expect banks to continue to keep interest rates low, for fear of choking off the recovery, and 46% think stocks in the S&P 500 Index are undervalued. In addition, 88% said they have returned to their normal level of cash holdings.

Asked what they think are the five most attractive investment sectors, the fund managers cited technology, energy, industrials, healthcare and materials. The findings were the most optimistic since Northern Trust began the poll a year ago.

“We found it interesting that managers expressed strong optimistic expectations for global growth and corporate earnings while at the same time expressing expectations for a stable inflationary environment,” said Chris Vella, global director of research at Northern Trust. “Though growth and inflation generally arrive hand-in-hand, multiple managers cited the express production capacity as counteracting any inflationary pressures.”

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.