In Northern Trust’s fourth quarter 2011 survey, 81% of participating investment managers expect job growth to remain stable or accelerate over the next six months, an increase of nine percentage points from the third quarter survey.
Further, 74% believe that economic growth, as measured by GDP, will remain stable or accelerate over the same period, 10% more than the previous quarter.
More than half (52%) expect corporate earnings to increase in the next three months, up from 34% who held that view in the prior quarter.
However, this nascent optimism is tempered by concerns over the ongoing debt crisis in Europe, with managers ranking this issue as the biggest risk to equity markets during the first half of 2012.
A majority of managers (56%) believe that a continuation of the crisis will likely result in one or more countries being asked to exit the European Union.
Managers continue to find attractive buying opportunities in US equities but the perceived degree of undervaluation changed significantly compared to the third quarter survey, following a significant upswing in equity markets during October.
Thirty-three percent of managers believe that the Standard& Poor’s 500 Index is undervalued by more than 10%, compared to 52% who held this view in the prior quarter.
At the same time, the group of managers that see the S&P 500 as undervalued by 10% or less grew to 42% in the fourth quarter, up from 23% previously.
Managers also shifted to a more bullish outlook on emerging market equities, with 61% stating that the asset class was undervalued, up 15 percentage points from their third quarter view.
The survey of 105 institutional managers was conducted in mid December 2011.
