Russell survey: Managers see markets in 2011 continuing their climb back from March 2009 lows
88% of managers expect U.S. equity markets to rise over the next twelve months
Seattle, WA December 14, 2010 Managers appear confident in the global economy and its ability to sustain the U.S. equity markets in their ascent from the deep lows of the global financial crisis. Eighty-eight (88) percent of the managers responding to the latest Investment Manager Outlook, a quarterly survey of U.S. investment managers conducted by Russell Investments, expect U.S. equity markets to rise over the 12 months ending December 2011. Forty (40) percent expect the markets to increase by 10 percent or more in 2011.
"Although economic growth in the United States has been slow, managers are not overlooking the fact that it has been positive. The fears around a double-dip recession seem to have subsided," said Rachel Carroll, client portfolio manager at Russell Investments. "The market drop that accompanied the global financial crisis was severe. The managers believe the markets are still working their way back and are set to rise in 2011. Their optimistic outlook may also be based on continued improvements in corporate fundamentals as well as further growth opportunities, particularly for large, multinational companies with strong balance sheets."
In the latest survey, majority manager sentiment on market valuation shifted to seeing the markets as fairly valued. Fifty-two (52) percent of managers believe the markets to be fairly valued, compared to September 2010 when 57 percent of managers saw the markets as undervalued. Thirty-eight (38) percent of managers responding to the latest survey believe the markets to be undervalued.
"The managers are looking outside the United States for more robust economic growth. As they consider the year ahead, they believe that the emerging consumer in Asia, and particularly in China, will be a key driving force for the markets to continue moving upward," said Carroll.
Russell's Investment Manager Outlook is an ongoing survey intended to generate a meaningful snapshot of investment manager sentiment each quarter. For the current installment of the survey, Russell collected the opinions of U.S. senior-level investment decision makers at equity investment management firms as well as at fixed-income investment management firms. More than 200 managers participated in this survey.
Additional findings from the Investment Manager Outlook include:
Manager bullishness for technology increases; consumer discretionary and consumer staples experience a reversal
Managers once again favor the technology sector above all others, marking the eighth survey in a row that technology has held the top spot. Eighty (80) percent of managers are bullish on technology, compared to 69 percent in September 2010. Manager bullishness for the energy sector also rose considerably, from 51 percent in the previous survey to 68 percent.
"Managers' confidence in the energy sector is rebuilding after recent negative impacts from the oil spill in the Gulf of Mexico and its aftermath," said Carroll. "There are many facets to the energy sector that managers across the style spectrum are finding appealing, from crude producers to coal and natural gas."
Interestingly, manager sentiment for the consumer discretionary and consumer staples sectors changed substantially and in opposite directions. Manager bullishness for consumer discretionary rose 17 percentage points from the last survey to 47 percent, while bullishness for consumer staples fell 10 percentage points to 35 percent, making the sector the least favored after utilities (18 percent bullishness).
"Managers typically head to consumer staples and utilities when they are worried, but clearly they are finding these sectors less interesting right now. They see other opportunities that outweigh their need for safety, which implies less concern about the economic outlook and an increased willingness to embrace risk once again," said Carroll.
Bullishness for real estate sees all-time high and U.S. Treasuries ties survey low
Real estate has been among the least-favored asset classes throughout the history of the Investment Manager Outlook survey, but in the latest iteration manager bullishness for real estate reached an all-time high at 31 percent, up 10 percentage points from the last survey. Manager bullishness for U.S. Treasuries fell to 5 percent, tying the all-time survey low set in June 2004.
"Although the manager sentiment appears primarily optimistic for the equity market, there may be some lingering interest in the strong dividend yields offered by REITs relative to other U.S. equities," said Carroll. "Managers have regarded Treasuries as unattractive for some time now, and the impact of quantitative easing has only compounded this opinion."
About Investment Manager Outlook
Prior to the end of each quarter, Russell polls a sample of investment managers to collect top-line opinions about their outlook for the direction of the markets, sectors and asset classes to watch, and trends on the horizon that could impact investment strategy. In addition to the quantitative results, the Investment Manager Outlook provides qualitative analysis and commentary from one of Russell's senior investment strategists. Detailed results and analysis from the Investment Manager Outlook are available on www.Russell.com/Helping-Advisors/Markets/InvestmentManagerOutlook.asp. For Index data, please visit www.russell.com.
As a leader in multi-manager investing and the creator of the Russell Indexes, Russell Investments seeks to understand capital markets and identify investment managers it believes have exceptional capabilities. To achieve these goals, Russell's analysts hold more than 5,000 research meetings each year with investment managers around the world. The cumulative knowledge gained from this unparalleled access to senior-level investment decision makers serves as the foundation for all of Russell's products and services.
Founded in 1936, Russell Investments is a global financial services firm that serves institutional investors, financial advisors and individuals in more than 40 countries. Over the course of its history, Russell's innovations have come to define many of the practices that are standard in the investment world today, and have earned the company a reputation for excellence and leadership.
Through a unique combination of wide-ranging and interlinked businesses, Russell delivers financial products, services and advice. A pioneer, Russell began its strategic pension fund consulting business in 1969 and today is trusted by many well-known worldwide institutions for investment advice. The firm has $149 billion in assets under management (as of 9/30/10) in its mutual funds, retirement products, and institutional funds, and is well recognized for its depth of research and quality of manager selection. Russell offers a comprehensive range of implementation services that helps institutional clients maximize their assets. The Russell Indexes calculate over 50,000 benchmarks daily covering 65 countries and more than 10,000 securities.
Russell is headquartered in Seattle, Washington, USA with offices in Amsterdam, Auckland, Chicago, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto. For more information about how Russell helps to improve financial security for people, visit us at www.russell.com.
Jordan McKerney, 206-505-1858
Matt Burkhard, 718-875-2122
Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.
Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
This is not an offer, solicitation, or recommendation to purchase any security or the services of any organization.
Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which can be expected to have less stability than those of more developed countries. Securities may be less liquid and more volatile than U.S. and longer established non-U.S. markets.
Bond investors should carefully consider risks such as interest rate, credit, repurchase and reverse repurchase transaction risks. Greater risk, such as increased volatility, limited liquidity, prepayment, non-payment and increased default risk, is inherent in portfolios that invest in high yield ("junk") bonds or mortgage backed securities, especially mortgage backed securities with exposure to sub-prime mortgages.
Stock/Equity investors should carefully consider risks such as market risk when investing. There are no guarantees when it comes to individual stocks. Any stock may go bankrupt, in which case your investment may be worth nothing.
Technology stocks are primarily companies that serve the electronics and computer industries or that manufacture products based on the latest applied science.
Materials and processing: Sector contains companies that extract or process raw materials. Some industries included in this sector are agriculture, fishing and ranching, building materials, forest products, and steel.
Energy: Sector contains of energy-related businesses, such as oil companies involved in the exploration, production, servicing, drilling and refining processes, and companies primarily involved in the production and mining of coal and other fuels used in the generation of consumable energy. Gas extraction, distribution and pipeline companies classify into this Sector. The alternative energy Sub-Sector includes companies engaged in any aspect of the solar power, wind power, hydro power and biofuel industries.
Russell Investment Group, a Washington, USA corporation, operates through subsidiaries worldwide including Russell Investments. Russell Investment Group is a subsidiary of The Northwestern Mutual Life Insurance Company.
Russell Investments is the owner of the trademarks, service marks and copyrights related to its indexes.
Russell Financial Services, Inc., member FINRA, part of Russell Investments.
For information on the Financial Industry Regulatory Authority, go to www.finra.org.