July 16, 2012
--- No recession is forecast, but investment managers show
less confidence in U.S. economy, according to Northern Trust’s second-quarter
Investment managers are becoming less positive on the U.S.
economy and corporate earnings because of the expected negative impact of a
recession in Europe and slower growth in China, according to the survey.
However, fewer than 10% believe the global risks
will be severe enough to push the U.S. economy into recession.
A majority of the 100 investment managers surveyed in mid-June believe Greece
will either remain in the European Monetary Union or make an orderly exit from
the currency, while 31% expect a Greek exit from the Eurozone will create a
contagion effect that spreads recession to other countries. Nearly a quarter of
managers surveyed believe countries other than Greece will leave the Eurozone.
“As a result of these macro concerns and higher levels of uncertainty, our
survey shows that the previously positive outlook for U.S. economic growth has
deteriorated this quarter,” said Chris Vella, chief investment officer for
Northern Trust Multi-Manager Investments. “While investment managers are not anticipating
that the U.S. will fall into a recession, the vast majority believe that the
U.S. will face a more severe slowdown than anticipated. Growing numbers of
managers expect market volatility to increase and are holding above average
levels of cash this quarter, reflecting their cautious stance.”
Northern Trust’s survey found some cause for optimism: A growing majority of
managers (67%) found U.S. equity markets to be attractively valued, with more
than a quarter seeing more than 10% upside. One-third of respondents see
housing prices rising in the next six months, the highest number since the
survey began in the third quarter of 2008.