Money Managers Look Abroad
As View on U.S. Turns Bearish
By ERIN E. ARVEDLUND / WSJ Sept 28, 2005
Money managers are more bullish on international equity markets and increasingly bearish on U.S. stocks, bonds, real estate and consumer-goods concerns, according to a third-quarter investor sentiment survey due out today.
The survey may give individual investors clues as to which sectors are falling out of favor, such as bonds and consumer stocks, and which ones are gaining favor, including overseas shares, among professional money managers. The quarterly Investment Manager Outlook Poll, conducted by Russell Investment Group in Tacoma, Wash., surveyed 81 institutional money managers.
A declining number see buying opportunities in American stocks. Only 24% of managers believe the U.S. equity market is "undervalued," meaning stocks are cheap, a drop of nine percentage points from the 33% of managers who saw opportunities in U.S. stocks in the second quarter. Those who believe the U.S. market is "overvalued," or expensive, almost doubled to 13% from 7%. Nearly two-thirds of managers, or 64%, believe the market is fairly valued, a five-percentage-point gain from last quarter.
Money managers "appear reluctant to commit themselves to any U.S. market segment except large-capitalization growth stocks, and even that support has slipped from last quarter," says Randy Lert, chief portfolio strategist at Russell. Some 65% of respondents voiced bullishness for large-cap growth stocks, compared with 69% in the second quarter.
Managers were increasingly hopeful about developed markets overseas: 52% of respondents were bullish on overseas shares -- defined as non-U.S.-domiciled equities -- up from 46% last quarter.
Many money managers were concerned that consumers could cut spending in response to high prices of gasoline and other fuels. Only 35% of money managers were bullish on consumer staples, down from 44% last quarter, and only 21% bullish on consumer discretionary stocks, less than half the 43% support the sector garnered last quarter.
Bearishness on bonds rose in the third quarter, with 68% of respondents bearish on corporate bonds, compared with 59% in the second quarter. The number of bears on high-yield bonds rose to 64% from 58%. On real-estate issues, 64% were bearish, up from 56%.
Russell Investment Group is a unit of Frank Russell Co., part of Northwestern Mutual Life Insurance Co. The firm markets stock benchmarks including the Russell 3000 Index, comprising the 3,000 largest U.S. stocks. It also has a money-management arm that markets fund investment vehicles to institutional investors.
The survey was sent to large- and small-cap equity and fixed-income managers in the U.S. and Canada. The firms responding had on average $43.5 billion in assets under management. |
