Money managers remain positive on U.S. economic and corporate growth but predict higher global market volatility in the first half of 2015, Northern Trust Corp.'s quarterly investment manager survey shows.
Eighty percent of managers expect market volatility to increase over the next six months, the highest level on record since the survey was launched in October 2008, and up 10 percentage points from last quarter.
Falling oil prices, geopolitical tension, economic slowdowns in Europe and Japan, and U.S. equity valuations raised volatility concerns this quarter, said Christopher Vella, Northern Trust's senior vice president and chief investment officer for multimanager solutions, in a news release.
Geopolitical risk remained the top concern for managers this quarter followed by a European economic slowdown. A majority of respondents (55%) expect eurozone economic growth to remain negative or flat in the next six months.
However, managers remain confident in the U.S. economy.
In line with last quarter, about 48% percent of respondents expect the U.S. economy to grow during the next six months.
Another 49% predict steady or stable U.S. GDP growth, up two percentage points from the third quarter. The rest of the respondents expect GDP growth to decelerate.
Also similar to last quarter, 95% of respondents expect U.S. company profits to remain the same or increase over the next three months.
“Given the relative strength in the U.S. economy, most managers do not expect the dramatic decline in the price of oil or the strength in the U.S. dollar to derail the U.S. equity market,” said Mark Meisel, senior vice president and senior investment product manager for multimanager solutions, in the news release.
Thinking globally, 86% of respondents believe the oil price collapse will have a positive impact on global GDP, while 11% predict a negative impact.
Managers continue to view emerging markets equities as the most undervalued at 53%, but down slightly from last quarter's 59%. On U.S. equities, 36% of managers believe the asset class is overvalued, the highest level on record and up eight percentage points from last quarter.