The Markets June 23, 2010

Money Managers See Market Value but Risk Potential

47% of professional money managers in Russell Investments’ latest quarterly poll believe the market to be undervalued, up markedly from 28% in the March 2010 survey.  
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A Russell news release about the latest Investment Manager Outlook survey said 9% of managers believe the markets to be overvalued. Managers see opportunity in the market’s current valuation levels but are also on heightened alert for the downside of risk.  

“Managers appear to be holding a ‘risk on, risk off’ switch and swing between loving risk and hating it, changing preferences quickly,” said Mark Eibel, director, Client Investment Strategies at Russell Investments, in the news release. “Managers believe the market is undervalued but want to see consistently strong earnings and improved employment before committing to ‘risk on’ again.”   

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In the latest poll, 73% of managers named economic issues in Europe as an issue posing a significant risk to the performance of U.S. stocks over the next 12 months.   

Manager bullishness for non-U.S. (developed market) equities reflects this same concern, falling 11% from the last survey to 34%. More than half of respondents also pointed to industry regulations (53%) and unemployment (52%) as primary concerns for U.S. equity performance.    

Additional findings include:  

  • Revealing a mindset that has turned increasingly cautious and risk-averse, manager sentiment became more bullish for several sectors and asset classes that are traditionally defensive in nature. Bullishness for cash rose 10% from the March 2010 all-time survey low to 16%, and U.S. Treasuries also saw a 6% increase from the last survey to 12%. Sectors such as consumer staples and utilities saw increases in bullishness as well, rising 5% and 9%, respectively, from the last survey.  
  • Technology continues its long run as the most-favored sector, although manager bullishness for the sector declined 10%  from March 2010 to 69%. Bullishness for the materials and processing sector also saw a sizable drop in bullishness of 9% points from the last survey to 40%.  

More than 150 managers participated in the latest survey. More information is at http://www.Russell.com/Helping-Advisors/Markets/InvestmentManagerOutlook.asp. 

   

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