Money managers are optimistic about equity returns in 2014 but still have concerns about intermediate-term government bonds and world growth, according to a survey by consulting firm Towers Watson.
The 128 money managers surveyed by the firm in November and December also said governmental intervention is a very significant concern for them over the next five years, and inflation, global economic imbalances and financial instability are among the most important issues they face in 2014.
Matt Stroud, head of investment strategy, Americas, said one of the more surprising results of the survey was money managers believing their clients would take on much more risk in 2014. Forty-four percent said their clients would be very aggressive or moderately aggressive in taking on risk, compared to 34% in the previous year's survey.
“Valuations aren't bad but they're not as a good as they were,” Mr. Stroud said in a telephone interview. “Here we have managers as a group saying they expect their clients to take on more risk. It's very interesting to see how powerful sentiment is there.”
Overall, the managers surveyed believe there will be mild growth, with the exception of the eurozone. Equity markets in 2014 are also expected to perform better than in 2013, with the exception of the U.S. and China. Managers expect equity returns averaging 6.9% in the U.S. this year, compared to an expectation of 7% in last year's survey.
Eighty-one percent of managers surveyed remain bearish on government bonds, compared to the 80% expecting the same in the 2013 survey, while 78% remain bullish on public equities, the same as the previous year.