Investment managers are less optimistic on the prospects for US economic growth in the near term and more concerned about the potential impact of an emerging markets slowdown on stock prices, according to a survey by Northern Trust Asset Management.
Approximately 100 money managers participated in the quarterly survey taken in mid-September 2015. The select group of respondents included fixed income and equity managers across value and growth styles, with a bias toward fundamental, bottom-up stock picking strategies, the company said,
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The survey found that only 29% investment managers expect growth to accelerate over the next six months, down from the 54% who expected accelerating growth in the previous quarter’s survey.
Respondents ranked a slowdown in emerging markets as the top risk to equity markets. In contrast emerging markets had been ranked last of eight possible risks to equities in the previous quarter.
A change in US monetary policy, which was ranked as the top risk to equities in the previous two quarters, slipped to fourth position in the third-quarter survey.
Northern Trust Asset Management chief investment officer for multi-manager solutions Christopher Vella said: "On a number of measures, managers have become less confident in their outlook. In line with their views on the US economy, fewer managers expect increases in U.S. corporate revenue and housing prices than in the previous several quarters, while the number of those expecting steady or stable growth has increased."
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By GlobalDataAfter stock market volatility hit record levels during the August market sell-off, nearly 20% of managers expect market volatility to decrease in the next six months, compared to just 1.4% with that view in the previous survey, the survey found.
Nearly 60% of the respondents said they believe volatility will increase, down from 74% with that view in the previous survey.
Northern Trust Asset Management senior investment product manager for multi-manager solutions Mark Meisel said: "Almost one in three managers is taking advantage of market volatility. Thirty percent of managers reported that have slightly increased their turnover to take advantage of market opportunities over the past quarter. At the same time, 20% have reduced their foreign currency exposure due to volatility in currency markets."
According to the report, concern over a slowdown in China was listed as the top reason for the equity market sell-off in August and early September.
Concern over the timing of a U.S. Federal Reserve interest rate increase was second, and continued weakness in the price of oil and other commodities was third.
Investment-grade corporate bonds, US high yield, global high yield-ex. U.S., and floating rate loans were ranked as the most attractive segments in the current fixed income environment.
While, asset-backed securities, emerging market bonds (US dollar) and emerging market bonds (local currency) were ranked least attractive.
