U.S. buy-side investors remain optimistic about the immediate outlook for corporate earnings momentum, but are cautious on how much further the equity market rally can go, according to a recent “flash poll” conducted by TheMarkets.com.
For the earnings cycle just reported, 45.5% of respondents overall said the performance of their portfolios exceeded their expectations, with cost-cutting measures such as layoffs, and government stimulus spending cited as contributing factors.
Asked about earnings prospects for the current quarter, U.S. respondents were relatively optimistic, with 60% predicting earnings would surprise on the upside, compared with 41% of non-U.S. respondents.
However, the average forecasts of where key stock market indexes will end 2010 suggested a degree of pessimism among both U.S. and non-U.S. respondents. The average forecast called for the S&P 500 to close at 1,146 on Dec. 31, 2010, little changed from 1,145.10 in midday trading today. The average forecast for the FTSE 100, at 5,082, was well below that index's close of 5,608.74 today.
Investors surveyed were less worried about U.S. stocks and bonds becoming way overvalued than they were five months ago, but more concerned about a bubble forming for gold and emerging markets equities.
Leading the list of markets likely to garner new investments was South America, with 9.7% of respondents predicting a new allocation there, followed by Asia Pacific, with 7.3%, and the Middle East, 4.6%.
A total of 164 executives, portfolio managers and research analysts from long-only asset managers, hedge funds and private equity firms responded to the survey, conducted between Feb. 24 and March 12, with 56% based in the U.S. and 44% abroad.