daytrade diaries... october 14, page-253

Institutional investment managers are optimistic on the economy. A vast majority (83%) expect corporate earnings to increase in the coming quarter and 84% believe global growth will accelerate in the next six months.

Institutional investment managers showed the most optimistic economic expectations from investment managers since the quarterly poll was begun a year ago by Northern Trust Global Advisors (NTGA).

Managers are still hesitant to call a buoyant V-shaped recovery, said the report, with potential fragility in the system. Just over three-quarters (76%) of respondents said they expect interest rates to hold steady, reflecting a view that central banks will be hesitant to raise interest rates for fear of choking off early signs of recovery.

Under half (46%) still believe the Standard & Poor's 500 Index is undervalued. The group of managers who believe the market has room for growth is more than double the size of those (20%) who believe the market is overvalued.

Reflecting a stabilisation of portfolio positioning, 53% of managers said they have no change in risk aversion and 88% said they are now within their normal range of cash holdings.

This is in contrast to responses from previous quarters when managers continued to increase risk and decrease cash positions at the margins.

Ahead of the late September announcement by the Federal Reserve to keep the main US interest rate unchanged, 75% percent of respondents expected interest rates to remain the same for the next quarter.

A majority (53%) now expect global inflation to remain the same for the next few months, compared to 42% who expressed the same opinion in the previous quarter.

Investment managers cited the technology, energy, industrials, healthcare and materials sectors as their top five most attractive market segments. The materials sector made its first appearance on the top-five list, edging out consumer discretionary.

The survey was completed by over 60 institutional managers, including fixed income and long-only equity managers across value and growth styles with a bias toward fundamental, bottom-up stock picking strategies. The survey is conducted quarterly.