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Double-dip recession unlikely, say institutional investment managers

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Institutional investment managers’ expectations for global growth improved in the third quarter and more than two-thirds of those surveyed believe a double-dip recession is unlikely, according to a quarterly survey conducted by Northern Trust Global Advisors.


Institutional investment managers’ expectations for global growth improved in the third quarter and more than two-thirds of those surveyed believe a double-dip recession is unlikely, according to a quarterly survey conducted by Northern Trust Global Advisors.

Managers were also broadly optimistic that US unemployment would ease in the next six months and that the financial markets would react favorably to a November election that shifts the balance of power in Congress.

"Our third quarter survey revealed some subtle but encouraging shifts in manager sentiment. The most notable trend is toward a sense of stabilisation within equity markets, as well as an uptick in global growth expectations," says Chris Vella, global director of research for NTGA. "As evidence of improvement in the macro environment, most managers also appear confident that a double-dip recession is unlikely."

The question on the likelihood of a return to economic recession was one of three topical questions in the third-quarter survey by NTGA, the multi-manager arm of Northern Trust Corp. The 83 respondents, all of whom participate in NTGA’s external manager platform, were also asked for their views on unemployment and the impact of congressional elections in the quarterly poll, taken in mid-September.

"This quarter we wanted to gauge manager views on US unemployment, a key indicator of economic health, and on the upcoming vote for Congress," says Harry Phinney, NTGA investment analyst. "Encouragingly, the great majority of managers think that the unemployment rate will decrease over the next six months. Additionally, should the November election result in a change of party control in one or both houses of Congress, more than 80 per cent feel that investors will react favorably to the change."

In NTGA’s survey, 68 per cent of managers believe the US will avoid a double-dip recession and 67 per cent of managers expect the unemployment rate to decrease over the next six months. Should voters place Republicans in control of the House or Senate next month, 84 per cent of institutional money managers expect investors to react favorably to the change.

These topical views came amid a generally positive outlook in the survey. Three-quarters of managers polled by NTGA expect global growth to accelerate or stay the same over the next six months, up from 63 per cent who expressed that view in the second quarter. More than 70 per cent of institutional managers believe inflation and interest rates will remain unchanged in the near term, and 61 per cent of those polled stated that the US equity market, as measured by the S&P 500 Index, is undervalued.

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