Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013
bronze bull statue

3543

Managers lower bullishness for emerging markets and corporate bonds

RELATED TOPICS​

Professional investment managers have dialed down their bullishness from last quarter, particularly in the areas of emerging markets and corporate bonds, according to a quarterly survey by Russell Investments.

Half of the surveyed managers, 54 per cent, also believe the US equity markets to be fairly valued reflecting the significant market move since early March.

The remaining managers are split nearly evenly between considering the markets to be undervalued or overvalued, 24 per cent and 22 per cent respectively.

“The highly bullish expectations that managers had earlier this year have been tempered by the strong showing from equities and fixed income as well as a ‘wait and see’ approach to the level of economic growth that likely began sometime in third quarter,” says Mark Eibel, director, client investment strategies, at Russell Investments. “The managers that believe the market is fairly or over valued have effectively pressed the pause button, waiting to get a clearer reading on the consumer, housing and unemployment numbers.”

Suspicions about the true strength of the economy were also revealed in manager responses to a question asking about expectations for the Consumer Price Inflation index. More than 70 per cent believe the year-over-year rate of consumer price inflation will be between one per cent and three per cent at the end of 2010. Of the remaining managers, there were more who believe the CPI will be below one per cent at the end of 2010 than who believe it will be above three per cent (16 per cent versus 12 per cent respectively).

“Even with an economic recovery underway, businesses will not likely be in a position to raise prices, and workers’ wages will also not increase in a meaningful way, both of which are inputs to the managers’ view on inflation, at least in the short term,” says Eibel. “Instead, the consensus appears to be that we are in the midst of a post-recession recovery that will not measure up to historical standards, even though we all know this has been no ordinary recession.”

Manager bullishness for fixed income took deep dives in this latest iteration of the Investment Manager Outlook. Bullishness for corporate bonds fell from 66 per cent last quarter’s survey to 44 per cent this one. Similarly, the positive sentiment for high yield bonds fell from 66 per cent to 52 per cent. These two asset classes experienced some of the largest declines in this survey, yet still remain at relatively high levels of bullishness over the history of the Investment Manager Outlook.

Manager concern over the strength of the economic recovery reflected itself in a decline in bullishness for several sectors that go hand-in-hand with economic growth. The three sectors that fell the most in this quarter’s manager survey were two sub sectors of energy (integrated oils and other energy) and materials and processing:

• Bullishness for integrated oils declined from 61 per cent to 46 per cent, while bearishness increased from 14 per cent to 21 per cent;
• Bullishness for other energy fell from 70 per cent to 56 per cent, while bearishness rose from ten per cent to 19 per cent; and
• Bullishness for materials and processing declined from 60 per cent to 53 per cent, while bearishness decreased slightly from 22 per cent to 20 per cent in September.

Technology repeated as the sector garnering the most manager bullishness, rising three percentage points from its previous all time Investment Manager Outlook high of 75 per cent to 78 per cent.

The top two asset classes for managers in the latest Investment Manager Outlook were emerging market equities and non-US (developed market) equities, 67 per cent bullish and 63 per cent bullish respectively. While manager optimism for emerging markets fell seven percentage points from the June survey, bullishness for non-US (developed market) increased ten percentage points.

“India, China and the other emerging markets will remain an investment story for many years, but emerging markets have run so hard of late that it makes sense that managers have pulled back a bit at this moment,” says Eibel. “It was a bit of a surprise to see managers so bullish on non-US (developed market), but these investment professionals might be expecting an echo of what we’ve seen in the US markets over the last six to nine months – a reassessment of value in a market that had been teetering on the edge.”

Latest News

MSCI has announced the launch of MSCI Private Capital Indexes, writing that with growing investor..
GAM Investments and Sun Hung Kai & Co, a Hong Kong-based alternative investment firm, are..
PwC’s Global Entertainment & Media Outlook 2024-28, covering 13 sectors across 53 countries and territories,..

Related Articles

Rod Ringrow, Invesco
Geopolitical tension has surpassed inflation as the primary concern of sovereign investors and is prompting greater interest in allocating to emerging markets, according to the twelfth annual Invesco Global Sovereign Asset Management Study...
Geopolitical tension has surpassed inflation as the primary concern of sovereign investors and is prompting greater interest in allocating to..
Green energy
2024 has been the strongest ever year for green bond sales, with deals topping USD356 billion in the first six months, according to research from Bloomberg...
2024 has been the strongest ever year for green bond sales, with deals topping USD356 billion in the first six..
infrastructure headline
The new Labour government has launched a GBP7.3 billion National Wealth Fund which will target private capital to support the UK’s growth ambitions...
The new Labour government has launched a GBP7.3 billion National Wealth Fund which will target private capital to support the..
Tom McPhail, lang cat
Today’s news of a landslide victory from the UK’s Labour party, finds that the markets had mostly factored in a widely predicted Labour win...
Today’s news of a landslide victory from the UK’s Labour party, finds that the markets had mostly factored in a..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by