Investment managers characterize the U.S. economy as resilient, whether or not the Federal Reserve curtails its current quantitative easing (QE3) program, according to a survey by Northern Trust. The survey of approximately 100 managers, taken between September 4 and September 18, also found nearly all -- nine out of 10 -- expected the political stand-off over the federal government shutdown and the U.S. debt ceiling would have at most a modest impact on U.S. equity markets. "Throughout 2013, investment managers have weighed the impact of politics and policy decisions against a steadily improving economy in their market outlook," said Christopher Vella, Chief Investment Officer for Multi-Manager Solutions at Northern Trust. "Regarding the budget stand-off, it seems as if Washington’s continued infighting was not news to Wall Street, and managers expected that gradual strengthening of key indicators would prevail over short-term political factors. Optimism on the economy also appears to outweigh Fed policy changes that have been anticipated by the financial markets." Managers expressed optimism on several key economic factors:
- 86% believe job growth will either remain stable or accelerate over the next 6 months
- 71% expect housing prices to rise over the next 6 months
- 89% expect corporate profits to remain stable or increase in the fourth quarter
“The change in monetary policy was still the number one risk on managers’ minds this quarter,” said Mark Meisel, Senior Investment Product Specialist of the Multi-Manager Solutions group, who oversees the survey. "Most managers are expecting that Washington will sidestep the budget and debt ceiling issues prior to significant harm being inflicted on the markets."Looking outside the U.S., managers are seeing value in Emerging Markets equities after losses in those markets in 2013. About two-thirds (64 percent) of managers believe emerging markets equities are undervalued, up from 49 percent in the second quarter. However, managers don’t expect strong performance to return soon: Only 23 percent of managers expect emerging market equities to outperform developed market equities over the next 6 months. Managers also view European equities favorably, with more than half (53 percent) saying European equities are undervalued. Most managers (69 percent) believe the Japanese equity market is undervalued or appropriately valued. On the bullish-bearish spectrum for asset classes and broad economic sectors, managers continue to be most bullish on U.S. large-cap equities, U.S. small caps and emerging market equities:
- 62% of managers are bullish on U.S. large caps.
- For small-caps, 53% of managers are bullish, down from 59% in the second quarter.
- 51% are bullish on emerging market equities versus 53% in the second quarter.
- Managers were most bullish on information technology, industrials and health care.
Asset Management at Northern Trust begins with listening and leads to answers beyond the expected for our clients. The multi-asset class investment management business is comprised of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Global Investments Japan, K.K., the investment advisor division of The Northern Trust Company and The Northern Trust Company of Connecticut and its subsidiaries which offer investment products and services to personal and institutional markets.About Northern Trust Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and Washington, D.C., and 17 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2013, Northern Trust had assets under custody of US$5.0 trillion, and assets under investment management of US$803.0 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com or follow us on Twitter @NorthernTrust.