The percentage of money managers who believe the stock market is undervalued has reached its highest level in more than a year, according to Russell Investments’ latest quarterly survey.
Fifty-seven percent of respondents described the U.S. equity market as undervalued, compared to 47% three months earlier.
The last time the survey’s undervalued sentiment hit this level was March 2009, a market bottom that was followed by a 65% rally by the S&P 500.
“With more conviction than at any point since the depths of the global credit crisis, the managers now believe the market to be undervalued but are far from expecting the same kind of surge that followed the market bottom of March 2009,” said Mark Eibel, director of client investment strategies at Russell.
The percentage of respondents calling the market overvalued fell by 2 percentage points to 7% during the most recent survey, conducted during the last week of August.
The results, which will be officially released Wednesday, reflect a cautious optimism among money managers, according to Mr. Eibel.
“As with all of these surveys, you have to consider what was happening at the time of the survey, and we found the majority of respondents were saying, ‘If we don’t go into a double-dip recession, then the market has probably overdone it,’” Mr. Eibel said.
By asset class, managers are most bullish on emerging markets (71%), followed by U.S. large-cap growth (66%), U.S. midcap growth (57%) and U.S. large-cap value (56%).
Manager respondents are most bearish on U.S Treasuries (75%), followed by cash (10%), real estate (21%) and corporate bonds (29%).
By sector, they are most optimistic about technology (69%), energy (51%) and materials (48%).
But health care and consumer discretionary both fell on the bullish meter since the last survey. Bullish outlook for health-care stocks fell to 48%, from 60%, and consumer discretionary fell to 30%, from 47%.
The survey results represent 169 equity and fixed-income asset managers from 124 investment firms, which have an average of $36 billion under management.
Jeff Benjamin writes for InvestmentNews, a sister publication of Pensions & Investments.