Russell Investments conducts investment fund manager surveys routinely, and there may be some good news for the cautious and timid bulls out there.  In short, Russell’s survey noted that U.S. economy is not entering a double-dip recession in its  Investment Manager Outlook.

The survey shows that 79% of investment managers surveyed in the latest quarterly survey say that they do not believe the U.S. economy is entering a double-dip recession.  We would note that there are two issues to consider here.  First is that this survey took place between August 23 and September 2.  Second is that the survey is based upon 102 fund managers, which some could easily argue is not exactly a broad consensus.

This comes at a time when even surveys differ from each other.  The CEO Roundtable has now turned for the worse.  We are also getting an equally mixed picture between the leading companies that measure international trade as well.

Of the 79% who believe we are not headed for another recession, some 78% of this subgroup cited strong corporate balance sheets and high corporate profit levels.  Of the subgroup, some 49% also pointed to the U.S. Federal Reserve’s decision to keep interest rates low until mid-2013. Additional indicators cited were declining oil prices and U.S. dollar weakness.

Despite the group not believing a recession is coming, 62% do expect growth to remain low for the next several years.

Of the recession camp, those managers who believe the U.S. economy is entering a recession is 11% and the other 10% said that we are already in a double-dip recession.  Of the recession group, employment recovery was cited by 95% as the recession exit strategy.

Russell’s observation indicates that the bulk of managers see a buying opportunity in the equity markets.  Some 57% believe that the stock market is currently undervalued even in the full group surveyed.  That is double the amount that said that in June.  Another interesting point is that only 10% of all those surveyed believe that the market is overvalued.  Some 32% believe the market is fairly valued, and that was 61% back in June.

• Bullish sentiment for U.S. large cap growth stocks increased 13 percentage points from the June survey to 73%.
• Bullishness for U.S. large cap value stocks hit an all-time survey high at 63% after a 14 point jump from June.
• Bullishness for emerging market equities hit an all-time survey high at 74%, up 15 points from June.

Russell noted that a resolution of the European debt issue is now the dominant issue and greatest threat to systematic stability. Russell used opinions of U.S. senior-level investment decision makers at both equity investment management firms and at fixed-income investment management firms.

JON C. OGG

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