Money managers still psyched about tech, large-cap growth

Technology and large-cap growth remain the darlings of money managers, while fixed income is losing its appeal, according to the latest quarterly survey of investment professionals by Russell Investments. The survey of more than 200 money managers, which will be released tomorrow, found technology is the sector garnering the most manager bullishness. Tech’s 82% positive ranking beats a sector record of 78% set by the previous survey three months ago. It also marks the fourth consecutive quarter that technology has received a bullish ranking. “A lot of the themes from the last quarter have continued because a lot of things have played out the way the market has expected them to,” said Mark Eibel, director of client investment strategies at Russell. Domestic large-cap growth also gained manager bullishness in the most recent survey, climbing 17 percentage points to 72%. The taste for large-cap growth follows the technology theme, according to Mr. Eibel, who pointed out that technology represents about 30% of the Russell 1000 Growth Index. “If the economy continues to heal, many companies could see expanded revenues placed on top of corporate structures that have become very efficient and streamlined,” he said. “The combination would prove to be a real win-win for the markets.” On the stock market in general, nearly 80% of respondents said they expect U.S. equity markets to rise over the next 12 months. “The last two quarters of these surveys have been a continuation of a theme,” Mr. Eibel said. “Even with the gains we’ve seen in the stock market this year, I’m not surprised managers are still bullish on next year.” He attributed the generally bullish attitude to strong earnings and revenue growth, as well as corporate-friendly monetary and fiscal policies. “The managers’ enthusiasm for the markets is no longer based on undervaluation, but on the hope that the handoff from cost cutting to real economic growth has begun,” he said. “How real this shift is and how long it lasts remain open questions dependent on macroeconomic factors such as unemployment and housing.” While stocks continue to gain favor among money managers, fixed income has become less attractive, according to the survey results. Bullishness for corporate bonds fell to 27%, down from 44% three months ago. Positive sentiment for high-yield bonds dropped to 34% from 52% in the previous survey. “Fixed income has offered truly remarkable returns over the course of this year, but the managers see that window of opportunity closing a bit,” Mr. Eibel said.