More money managers are adopting a moderate outlook on U.S. economic growth, a quarterly survey by Northern Trust shows.
Of the approximately 100 managers surveyed, 47% expect GDP growth to accelerate over the next six months, down 21 percentage points from last quarter.
Another 47% predict steady or stable GDP growth over the next six months, up 19 percentage points from the second quarter. The remainder expects GDP growth to decelerate.
“The U.S. growth expectation did moderate a bit,” Christopher Vella, chief investment officer for multimanager solutions at Northern Trust, said in a telephone interview. However, there is an “underpinning of positive corporate earnings expectations,” he noted.
Some 72% of managers surveyed expect U.S. company profits to increase over the next three months, up seven percentage points from last quarter.
Geopolitical risk remained managers’ top concern in the third quarter, with 34% expecting these risks to increase over the next six months. Other top concerns were change in U.S. monetary policy and an economic slowdown in Europe. Additionally, 70% expect market volatility to increase over the next six months, the highest level since the survey began in the third quarter of 2008.
Managers view emerging markets equities as the most undervalued (59%), ranking that asset class ahead of U.S. large-cap equities for the first time in more than three years. “This was one of the first times that we saw U.S. large-cap (equities) dropping,” Mr. Vella said, noting large cap had been “one of the more attractive parts of the markets” for a long time.
On European equities, 42% of managers believe the asset class is undervalued, down seven points from last quarter, while 42% say it is appropriately valued and 16%, overvalued. Additionally, 69% of respondents believe the European Central Bank’s decision Sept. 4 to cut interest rates will have a positive impact on European equities over the next three months.
The survey was conducted Sept. 5-19.