GLOBAL - Three quarters of institutional investment managers believe global growth will remain stagnant over the next six months, according to research by Northern Trust Global Advisors (NTGA).
In the firm's quarterly survey of managers, more than two-thirds of respondents expect sovereign debt concerns regarding Portugal, Italy, Ireland, Greece and Spain will weigh on global markets for the next six months or longer.
In a significant shift from the previous four quarters, 75% of the 90 global managers surveyed by NTGA in Q2 anticipate that global growth will remain the same or decelerate, while 25% still expect growth to accelerate. Accordingly, institutional managers are less concerned about the prospect of inflation or rising interest rates.
Managers are also increasingly optimistic about market valuations. For the first time since the second quarter of 2009, the majority of managers (62%) stated that the U.S. equity market, as measured by the S&P 500 Index, is undervalued. Select areas of international markets are also seen to be attractive: 40% of managers said they now believe emerging market equities are undervalued.
NTGA global director of research Chris Vella said: "Our second quarter survey revealed less optimistic growth expectations from our managers. In an environment where growth is less broad-based, employing managers that are strong stock pickers can be even more valuable."
Investment managers cited technology, energy, healthcare, emerging markets and industrials as the top five most attractive market segments. Consumer discretionary slipped out of the top five, while emerging markets moved up in the rankings.
A growing number of managers (80%) are confident that interest rates will be steady over the next quarter. This figure is up from 66% in the first quarter. About 18% of managers surveyed expect interest rates to rise, compared to 32% in the first quarter.
Nearly a third of managers (31%) stated that they are more risk-averse compared to three months ago, up from 23% in the first quarter. At the same time, portfolio concentration has increased, with 24 percent of managers saying their portfolios are more concentrated compared to 10% in the last survey. However, 79% of managers are within their normal range of cash holdings, holding steady from the first quarter survey.
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