The Markets October 17, 2008

Money Managers Report Bright Spots despite Dim Economic Outlook

A poll of investment managers found a large majority, regardless of investment strategy, expect corporate earnings to drop and global growth to decelerate in the short term.
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However, the survey, conducted by Northern Trust Global Advisors (NTGA), did reveal some bright spots within the U.S. equity market, most notably in the health care, technology and energy market segments.

Despite a generally negative sentiment, managers are still finding attractive investing opportunities, with 60% of those surveyed believing that the S&P 500 Index is undervalued – compared to mid year, when only 46% of thought that the index was undervalued, according to a release of the results.

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Out of a range of various investment options, managers overwhelmingly favored the U.S. large cap and U.S. small cap asset classes, specifically citing health care, technology, and energy sectors as their preferred market segments.

Other findings from the survey include:

  • 86% of participants believe that corporate earnings will decrease over the next three months.
  • In a marked change from the previous quarter’s survey, 49% believe that U.S. interest rates will remain the same over the next three months; 23% expect rates to rise, and 28% anticipate lower rates. In contrast, 84% of managers in the previous quarter believed that U.S. interest rates would remain the same, while 8% expected rates to rise and 8% anticipated lower rates.
  • 87% of respondents expect global growth will decelerate through the end of 2008.
  • In a sharp turnaround from the previous quarter, 54% expect global inflation to decrease. In the previous quarter, prior to the September market turmoil, 85% believed that global inflation would increase or at least remain the same through the remainder of the year.
  • 87% expect housing prices to decrease in the next six months and 13% expect housing prices to remain the same. No respondent believes that housing prices will increase in the next six months.

“In light of recent market turmoil, this survey provides interesting insight as to where a large proportion of managers see potential opportunities and risks,” said Andrew Smith, chief investment officer for NTGA, in the press release.

The survey of more than 75 institutional money managers was conducted by NTGA in September.

Products October 16, 2008

Franklin Templeton Launches Global Bond Portfolio

Franklin Templeton Investments introduced the Templeton Global Total Return Fund, a multi-sector global bond fund designed to capitalize on fixed-income opportunities around the world.
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A Franklin news release said the fund invests primarily in fixed and floating-rate bonds of corporations, governments, and government-related issuers worldwide.

In pursuit of total investment return, it is anticipated that the fund will invest in a combination of investment grade and non-investment grade debt. Assets are allocated based on the manager’s assessment of value across countries and sectors, given changing market, political, and economic conditions, as well as an in-depth evaluation of interest rates, exchange rates, and credit risks, according to Franklin.

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“Global bonds are among those asset classes that can support portfolio diversification while benefiting from varying economic conditions around the world,” said Portfolio Manager Michael Hasenstab, senior vice president and co-director of Franklin Templeton Fixed Income Group’s international bond department. “Today’s evolving environment provides global bond investors with the prospects to weather downturns in particular markets, reduce volatility and participate in selective currency and interest rate opportunities.”

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