(July 12, 2012) — Investment managers in the United States are negative on their economic outlook, yet fewer than 10% believe that global risks will be severe enough to push the market into recession.
These findings come from a recent study by Northern Trust, which surveyed 100 investment managers in mid-June.
“As a result of these macro concerns and higher levels of uncertainty, our survey shows that the previously positive outlook for US economic growth has deteriorated this quarter,” said Chris Vella, chief investment officer for Northern Trust Multi-Manager Investments. “While investment managers are not anticipating that the US will fall into a recession, the vast majority believe that the US will face a more severe slowdown than anticipated. Growing numbers of managers expect market volatility to increase and are holding above average levels of cash this quarter, reflecting their cautious stance.”
Thirty-one percent expect a Greek exit from the Eurozone will create a contagion effect that spreads recession to other countries. Nearly 25% of managers surveyed believe countries other than Greece will leave the Eurozone.
Meanwhile, 67% of respondents find US equity markets to be attractively valued. One-third of respondents see housing prices rising in the next six months — the highest number since the survey began in the third quarter of 2008. A total of 29% of respondents believe earnings will grow in the next three months, a significant drop from 53% last quarter. Those anticipating a decrease in corporate earnings in the next quarter rose to 32% from 23% in the first quarter of 2012.
Furthermore, 65% of managers expect market volatility, as measured by the Volatility Index (VIX), will increase over the next six months. That is up from 19% who expected higher volatility in the first quarter and the highest level since the inception of the survey in the third quarter of 2008.