Northern Trust Survey: Housing Rebound Leads Positive Economic Indicators For Investment Managers

Institutional investment managers anticipate a rebound in the housing market and see less downside risk for U.S. economic growth over the next six months, despite a mixed outlook on corporate earnings and concerns regarding a potential “fiscal cliff” in the U.S. and the ongoing financial crisis in Europe, according to a quarterly survey by Northern Trust.

Investment managers surveyed in mid-September also expect the U.S. presidential election will have little effect on the markets: 52 percent predict a neutral impact, 28 percent expect a positive impact and 19 anticipate a negative impact from the election. Most (62 percent) said their response was not dependent on which party wins the election.

“Manager sentiment regarding the U.S. economy seems to have rebounded in the third quarter after dipping at mid-year,” said Chris Vella, Chief Investment Officer for Northern Trust Multi-Manager Investments. “Expectations for a rebound in housing, stable or increased job growth and a positive impact from the Federal Reserve’s third round of quantitative easing appear to have overcome – for now – the global and macroeconomic issues that weigh on investors’ minds. And managers indicate the U.S. election will provide clarity to the markets, regardless of the outcome.”

The survey of approximately 100 institutional managers, conducted in mid-September by Northern Trust Multi-Manager Investments, showed a meaningful increase in positive expectations for the U.S. housing market. A large majority (69 percent) of managers expect U.S. housing prices to increase over the next six months, up from 33 percent in the second quarter of 2012.

Managers also see less downside risk in U.S. economic growth. In the third quarter, 87 percent of respondents said GDP growth would remain stable or accelerate, up significantly from 70 percent in the second quarter. The outlook for job growth improved, with 57 percent expecting job growth to remain stable and another 25 percent anticipating a pick-up in growth over the next six months. Eighteen percent said job growth would decelerate, down from 40 percent who held that view in the second quarter survey.

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