Institutional investment managers severely lowered their expectations for global growth for the remainder of 2010, according to a Northern Trust survey.
A quarter of 90 institutional managers surveyed by Northern Trust still expect global growth for the next six months. That's down from 61% in the previous quarter, 76% in the fourth quarter of 2009 and 84% in the third quarter of 2009.
Janet Yang, investment product manager at Northern Trust, said many are concerned over sovereign debt issues in Europe, particularly Portugal, Italy, Ireland, Greece and Spain.
“They're afraid (the European Union will) have to bail out Spain and won't be able to do it,” she said in a telephone interview.
Despite a dismal outlook for growth, managers were increasingly optimistic about market valuations, with 62% saying that the U.S. equity market, as measured by the S&P 500, is undervalued. Fifty-three percent of survey respondents said Japanese equity markets are undervalued, and 40% believe emerging markets are undervalued.
Twenty-nine managers also showed an increased expectation that volatility will decrease over the next six months, up 20 percentage points from the previous quarter.