The technology sector continues to stand out as an area of opportunity, according to the latest quarterly survey of investment professionals by Russell Investments.
The Investment Manager Outlook, a survey of nearly 300 institutional money managers, found that 78% of respondents are bullish on the technology sector. This compares with 75% of respondents who took the bullish stand on the sector three months ago.
The survey was conducted during the first week of September.
“Technology is now seen as an all-weather area or even a kind of defensive position, which is quite different from the way investors viewed tech stocks 10 years ago,” said Mark Eibel, director of client investment strategies at Russell.
The survey findings are scheduled to be released on Tuesday afternoon.
Although the general tone of the survey findings suggested that money managers are taking a more cautious approach to a stock market that many now think is close to fairly valued, the health care sector also saw an increase in bullish supporters.
The bullish bias for the health care sector grew to 56% in the most recent survey, up from 44% three months ago.
The percentage of money managers who think that U.S. stocks are fairly valued rose to 54% in the most recent survey, from 44% three months ago.
Those respondents who identified the stock market as being undervalued fell to 24%, from 38% in the last survey.
And the overvalued camp grew to 22%, from 18%.
“Right now, it seems like managers are really in a wait-and-see mode,” Mr. Eibel said. “People are looking at the mild recovery, but they still need confirmation that the
recession is over.”
Key indicators of an improving economy will be evaluated through more economic growth data, including unemployment and housing statistics.
“The stock market has already come a long way, and investment managers are waiting to see how strong the recovery really is,” Mr. Eibel said. “Right now, they need more confirmation, and they will have a better read on the economy in a few months.”
One indicator of where the money managers see the economy headed is found in a response to a question related to where they think inflation will be a year from now.
Forty-one percent said that they see inflation between 1% and 2% next year, while 32% said that they see it between 2% and 3%, and just 12% said that they think that inflation will be above 3%.
“The managers believe we're in an economic recovery, but by anticipating a tame level of inflation it means they don't believe we're off to a roaring recovery,” Mr. Eibel said.
The areas where the managers were most bearish included U.S. Treasuries, real estate and cash.
Only slightly changed from three months ago, the bearish bias on Treasuries dropped to 69%, from 83%.
For real estate, the bearish bias dropped to 55%, from 62%, and the bearish bias on cash grew slightly to 63%, from 62%.
