Money managers are less confident in near-term U.S. economic growth and more concerned about an emerging markets economic slowdown, said Northern Trust's quarterly investment manager survey released Thursday.
Only 29% of respondents expect the U.S. economy to grow over the next six months, the lowest reading in the last three years, and down from 54% last quarter. Furthermore, only 25% expect corporate revenue to accelerate over the next six months, down from 40% in the second quarter. On the labor front, 22% of managers expect U.S. job growth to decelerate but remain positive over the next six months, up from 14% last quarter.
An emerging markets slowdown was the top concern for managers this quarter. Last quarter it ranked last among the eight possible risks to equity markets.
The survey also asked respondents to provide reasons for August and early September's equity market sell-off. In August, U.S. equities dropped about 6%, international developed equities about 7% and emerging market equities, 9%.
Concern over a slowdown in China was ranked as the top reason for the equity sell-off in, followed by the timing of the U.S. Federal Reserve's rate hike, and weak oil and other commodity prices.
Also, 60% of mangers surveyed expect market volatility to increase over the next six months, down from 74% last quarter.
Other key findings of the third-quarter survey include:
- 52% of managers viewed emerging market equities as undervalued, up from 38% last quarter, and 49% believe European equities are undervalued compared to 52% last quarter;
- 37% of managers said U.S. equities are overvalued, the highest reading for any equity region. However, 34% believe they are undervalued and the remaining 29% say they are appropriately valued;
- Managers are most bullish on international developed markets equities and U.S. small cap, and most bearish on U.S. bonds and emerging market debt; and
- 20% of managers reduced their foreign currency exposure or revenue in light of the recent currency volatility.
About 100 money managers were surveyed in mid-September.
