Asset managers expect increased volatility in first half of the year, Northern Trust survey shows
Investment managers are optimistic about corporate profits and US economic growth in the first quarter of 2014 even as they brace for increased volatility, according to a Northern Trust survey.
Sixty-nine percent of fund managers interviewed for the survey expect corporate profits to continue to rise in the first quarter, an increase from 49 percent who said the same in the previous quarterly survey, according to Northern Trust. At the same time, the number of respondents who predict accelerating or sturdy job growth has jumped to 95 percent from 86 percent.
Emerging market and European equities are among the top picks for the first quarter of 2014 for fund managers surveyed in December. More than half (57 percent) say emerging markets equities are undervalued while 52 percent say the same of European equities. Only 36 percent say US stocks are undervalued and 31 percent say the same of Japanese stocks.
‘Optimism continues to rise among investment managers. On several key indicators, managers are more positive,’ says Christopher Vella, chief investment officer for multi-manager solutions at Northern Trust, in a statement to the media. ‘Most managers expected the Fed would taper QE3 [the US’ third round of quantitative easing] in the first quarter of 2014 and expect interest rates to rise as a result, yet they continue to be bullish on US large-cap equities and have positive expectations on both profits and job growth.’
Fund managers are braced for increased volatility, however, and are more likely to shun risk, the survey shows. Sixty-four percent of respondents say volatility will increase in the first half of the year and the number of managers who say they are more risk-averse has risen to 34 percent in the latest survey from 20 percent in the previous. More than half of respondents report no change in their risk appetite.
The survey, conducted as part of Northern Trust’s fourth quarter review, asked approximately 100 fund managers about their outlook for the coming year. The interviews were conducted between December 3 and December 18.
