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According to the latest U.S. Investment Manager Outlook (IMO), a quarterly survey conducted by global asset manager Russell Investments, nearly half of the managers surveyed (48 percent) expect developments in the eurozone to have a negative impact on the markets over the next year – pointing to the anticipation of minimal progress toward meaningful resolution. However, 33 percent of managers expect eurozone debt crisis developments to impact the equity markets positively, citing expectations of resolution and a belief that many of the possible negative outcomes are already priced into the markets.
For the current installment of the IMO survey,
Investment managers also pointed to the outcome of the U.S. presidential election (30 percent) and the outcome of the U.S. “fiscal cliff” situation (28 percent) as the events they expect to have the greatest positive impact on the U.S. markets in the next year. On the other hand, many managers (37 percent) pointed to the fiscal cliff – or the expiration of certain tax cuts and the imposition of automatic spending reductions at the end of 2012 – as an event with a negative expected impact. Managers also expect developments in China’s economic situation (18 percent) to have a negative effect on the markets.
“The markets don’t like uncertainty and managers are still looking for clarity on many issues, from the eurozone to the U.S. presidential election and the U.S. fiscal cliff,” said
Specific to the eurozone issues, Carroll added that positive developments have been seen recently with the European Central Bank’s announcement of a broad bond-buying plan and the approval of the European Stability Mechanism by Germany’s Constitutional Court. “While an escalation of the euro-crisis seems unlikely for the next few months, some managers are looking for other underlying issues in
Managers’ GDP growth expectations diminished, looking to the Fed
Despite the notable initial market reaction to the announcement of the Federal Reserve’s plan to initiate a third round of quantitative easing (QE3) and other efforts to support economic recovery, U.S. Federal Reserve policy action was not among the top events managers expected to be most impactful on the markets.
The IMO survey was conducted before the
Additionally, most managers (73 percent) indicated that they expect U.S. real gross domestic product (GDP) growth to fall between 1.5 – 2 percent in the next year. This represents a less optimistic view than seen in the
“Like many managers,
Manager bullishness flat for most asset classes, up in real estate
The latest IMO survey showed manager bullishness on most asset classes over the next 12 months was down or nearly the same as in the
Meanwhile, real estate reached an all-time survey high at 55 percent bullishness, becoming the asset class managers were most bullish on for the first time in survey history. Non-U.S. developed market equities also saw an 11 percentage point increase in bullishness from the
Bullishness for cash and U.S. Treasuries was down to 7 percent for both asset classes in the latest survey, from 17 percent and 12 percent respectively in the
“Managers’ outlooks for many equity asset classes are likely being influenced by their expectations of slow economic growth in the U.S. and continued uncertainty in the near term surrounding the key issues impacting markets,” said Carroll. “Yet they aren’t running to historical ‘safe havens’ like cash or Treasuries, but instead are looking to areas that appear more attractive on a relative basis like real estate, which offers appealing dividend yields as well as strong valuations thanks to modest new construction levels benefiting existing properties.”
Managers looking to pro-cyclical, growth-oriented sectors
Managers’ sector outlooks in the latest IMO suggested their preference for more pro-cyclical, growth-oriented sectors such as technology (up 11 percentage points from
About the Investment Manager Outlook
Russell’s analysts hold more than 3,000 research meetings each year with investment managers around the world. Based on these conversations,
More information about the IMO, including a video and a full report of findings, can be found at: http://www.russell.com/US/market_insights/Investment_Manager_Outlook/investment_manager_outlook.asp.
About Russell Investments
Russell Investments (
Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.
Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
This is not an offer, solicitation, or recommendation to purchase any security or the services of any organization.
Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability than those of more developed countries. Securities may be less liquid and more volatile than U.S. and longer established non-U.S. markets.
Bond investors should carefully consider risks such as interest rate, credit, repurchase and reverse repurchase transaction risks. Greater risk, such as increased volatility, limited liquidity, prepayment, non-payment and increased default risk, is inherent in portfolios that invest in high yield (“junk”) bonds or mortgage backed securities, especially mortgage backed securities with exposure to sub-prime mortgages.
Stock/equity investors should carefully consider risks such as market risk when investing. There are no guarantees when it comes to individual stocks. Any stock may go bankrupt, in which case your investment may be worth nothing.
Technology stocks are primarily companies that serve the electronics and computer industries or that manufacture products based on the latest applied science.
The financial services sector consists of companies that provide financial services including banking, finance, life insurance, and securities brokerage, and services companies.
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Source: Russell Investments
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