Money managers expect stocks continue their strong run in 2011, according to a survey being released tomorrow.
Money managers expect stocks continue their strong run in 2011, according to a survey being released tomorrow.
Forty percent of managers surveyed believe the stock market will gain 10% or more next year, while another 48% say the market will at least finish in positive territory, according to the November survey of 206 U.S. money managers by Russell Investments.
Through Friday's close, the S&P 500 Index was up 11.7% from the start of the year.
The November survey found that 90% of managers believe the equity markets are attractively valued with a preference for “pro-economy sectors,” according to Rachel Carroll, client portfolio manager at Russell Investments.
“In addition to a generally optimistic feel, they also like the kinds of stocks that will do well in an economic recovery,” she said. “Money managers think consumers are going to be spending more.”
By sector, managers are most bullish on technology (80%), energy (68%), metals and processing (58%), health care (54%) and consumer discretionary (47%).
“Although economic growth in the United States has been slow, managers are not overlooking the fact that it has been positive,” said Ms. Carroll. “Their optimistic outlook may also be based on continued improvements in corporate fundamentals as well as further growth opportunities, particularly multinational companies with strong balance sheets.”
In terms of general equity market valuations, 38% of respondents called the market undervalued, down from 57% three months ago, and 52% called the market fairly valued, up from 36% three months ago.
Ms. Carroll said the managers who described the market as fairly valued “are still seeing the market as attractive.”
The results of the midterm elections are considered positive for stocks, but not as good for bonds.
According to the survey findings, 79% of managers felt the midterm elections would be positive for equities, but only 26% saw the results as positive for bonds.
“We expected that kind of divergence of opinions with regard to stocks and bonds,” Ms. Carroll said. “On the equity side, the markets like a balance of power in Washington because it removes uncertainty.”
On the fixed-income side, she added, the market is still worried about the impact of programs such as quantitative easing.
“It will be a long time before we see another bond market rally like the one we saw in 2009,” she said.
By asset class, managers were most bullish at U.S. large cap growth (73%), emerging markets (71%) and U.S. mid-cap stocks (69%).
The least-favored asset classes included Treasuries at 5%, cash at 7%, corporate bonds at 24% and real estate at 31%.
