Institutional investors remain optimistic that the global economy and the interest rate-ridden housing market will help create “stability” and growth in the New Year, a Northern Trust Global Advisors (NTGA) survey found.
The NTGA fourth quarter 2009 survey, which was conducted in mid-December, included responses from more than 100 institutional investor managers.
Overall sentiment for 2010 points to similar findings from last year’s third quarter relating to proposed earning potential in U.S. equities. According to the results, 45% of the respondents stated that the S&P 500 Index is undervalued.
"Our fourth quarter survey showed an overall stabilization of optimism regarding both the market and global economic conditions," said Chris Vella, NTGA global director of research.
More than 84% of the fund managers are expecting corporate earnings to rise in the first quarter. Additionally, even though global growth forecasts dropped nearly 10 percentage points from last quarter, more than 75% expect acceleration over the next six months. Furthermore, more than 60% of the institutional managers expect “an end to home value declines in the next six months,” the statement said.
Vella also touched on manager concern for inflation in the market and possible “impact of a withdrawal of economic and monetary stimulus.” More than 45% of the managers expect an increase in inflation, but more than half put inflation at a stand-still over the next six months.
“These issues are being watched closely by managers, but don't appear to pose an immediate threat to market stability," Vella said.
Additionally, more than 56% of the institutional managers expect their investment strategies to be “holding steady” given the optimistic augury. Also, many of the managers expect to continue investments in technology, healthcare, energy emerging markets and consumer discretionary. The managers labeled the five options as the top five most attractive investment strategies in the fourth quarter study.
"Emerging markets is an area of particular interest for our managers," Kelly Swiatek, NTGA investment analyst, said. "Managers are especially drawn to the strong growth potential of companies in these developing economies."