Most U.S. and U.K. money managers expect corporate earnings in their respective regions to drop in the next 12 months, while Australian firms are generally bullish, and the Japanese are split down the middle, according to a new survey by AXA Rosenberg. Of the 196 investment professionals polled, 67% of U.S. managers believe the U.S. is late in its economic cycle; 65% expect weaker economic growth; and 43% characterized their equity market as overvalued. About 48% of managers in the U.K. think they are in the middle of their economic cycle, and an equal number believe they are late in the cycle. Most, though, anticipate weak growth going forward. In Australia, 69% of managers believe they are early or midway through their economic cycle, and 38% expect stronger earnings growth going forward. Of Japanese managers, 76% said they are in the middle to late phase of the economic cycle, and 70% expect modest to weak growth going forward, but 75% think their market is undervalued.
Despite the regional differences, most managers across the board expect the recent wave of market volatility to continue, AXA Rosenberg Global CEO Stephane Prunet said in an interview. They seem to be very realistic that we are facing a difficult environment. Long-term investors such as pension funds can afford to ride out the volatility while taking advantage of strategies that benefit from the current environment, like long-short equity strategies, he added.