The Markets September 22, 2010

Money Manager Group Sees Market Value Potential

 Fifty-seven percent of money managers responding to a Russell Investments poll now believe the market to be undervalued.
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A Russell news release said that represented the second-highest percentage response in survey history on that issue and the highest since the March 2009 survey. Only 7% of managers believe the markets are overvalued.

Forty-nine percent expect that capital spending on equipment and construction will most likely drive economic growth in the U.S. over the next 12 months. Some 18% of managers point to government spending and investment as the main driver, and 15% believe personal consumption will play that role. Only 9% of managers anticipate that the economy will not grow in the next year.

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“With more conviction than at any point since the depths of the global credit crisis, the managers now believe the market to be undervalued but are far from expecting the same kind of surge that followed the market bottom of March 2009,” said Mark Eibel, director, Client Investment Strategies at Russell Investments, in the news release. “Even still, optimism within a framework of diminished expectations is still optimism, and the most positive managers may be holding out hope that a tidal change is beginning to gather momentum, one built on strong corporate earnings and a recovering economy.”

Additional findings include:

  • Technology maintained its long-running position as the most preferred sector at 69% bullishness, followed by energy and then materials and processing, at 51% and 48%, respectively.
  • Forty-eight percent of managers were bullish on health care in the latest survey, down from 60% in June 2010 and 63% in March 2010.
  • Bullishness for emerging market equities rose 10% from the last survey to 71%. Only 12% of managers surveyed were bearish on emerging market equities, an all-time low for the survey. While manager bullishness for non-U.S. (developed market) equities rose 18% from June 2010 to 52%, this measure of optimism is still down from 63% one year ago.

For the current installment of the survey, Russell collected the opinions of senior-level investment decision makers at U.S. large-cap and small-cap equity investment managers, as well as at U.S. fixed-income investment managers. Nearly 170 managers participated in this survey.

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