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Northern Trust Survey: Managers Expect Continued Growth in U.S. Economy and Profits

Investment managers expect continued growth in the U.S. economy and corporate profits even as the Federal Reserve reduces its bond buying under the quantitative easing program (QE3), according to a quarterly survey conducted by Northern Trust.

Chicago, January 15, 2014 —

Investment managers expect continued growth in the U.S. economy and corporate profits even as the Federal Reserve reduces its bond buying under the quantitative easing program (QE3), according to a quarterly survey conducted by Northern Trust. The survey of approximately 100 managers, taken December 3-18, also found that 69 percent expect interest rates will rise when the Fed begins its QE3 tapering.

"Optimism continues to rise among investment managers. On several key indicators, managers were more positive in our fourth quarter survey than they had been in the third quarter survey," said Christopher Vella, Chief Investment Officer for Multi-Manager Solutions at Northern Trust. "Most managers expected the Fed would taper QE3 in the first quarter of 2014 and expect interest rates to rise as a result, yet they continue to be bullish on U.S. large-cap equities and have positive expectations on both profit and job growth."

Fundamentals within the economy and corporations are seen by managers as steady to improving. For example, 95 percent of respondents expect job growth to be steady or increasing over the next six months, compared to 86 percent who held that view in the previous survey. On corporate profits, 64 percent of managers expect earnings to increase over the next three months, versus 49 percent with that view in the third quarter survey. Overall, 95 percent of respondents believe corporate earnings will be stable or increase.

Along with these positive views, 64 percent of investment managers believe market volatility as measured by the Chicago Board Options Exchange's Volatility Index (VIX) will increase over the next six months. Also, 34 percent of managers became more risk-averse in their portfolios in the fourth quarter, compared to 20 percent in the third quarter. More than half report no change in risk aversion.  The vast majority, 82 percent of managers, have maintained a "normal" cash level, in line with the previous quarter.

Most managers see attractive valuations in emerging market and European equities: 57 percent say emerging market equities are undervalued and 52 percent believe European equities are undervalued. This compares with 36 percent of respondents who view U.S. equities as undervalued. Managers are almost evenly split on valuations of the Japanese equity market, with 31 percent seeing it undervalued, 36 percent appropriately valued and 33 percent overvalued. While emerging markets seem to have the most favorable valuations, they are ranked third on the survey's "Bull/Bear Indicator," behind U.S large cap equities and non-U.S. developed markets as the most bullish asset classes. 

"Even though managers expect some headwinds, increasing interest rates and less favorable relative valuations, they continue to be most bullish on U.S. equities." said Mark Meisel, Senior Investment Product Specialist of the Multi-Manager Solutions group, who oversees the survey. "In the fourth quarter, U.S equity indexes reached all-time highs, yet 97 percent of managers said they did not think the U.S. equity market had formed a bubble."

With Ben Bernanke scheduled to step down as Federal Reserve chairman at the end of January, managers were asked to rate his performance. Bernanke chaired the Fed starting in January 2006 and led it during some of the most tumultuous times in the financial markets and global economy. Slightly more than 78 percent of managers believe Bernanke's leadership of the Fed during this period was either good or very good. Approximately 18 percent of managers thought his leadership was average.

For more details, please see the full Investment Manager Survey Report on Northern Trust's web site. For its survey, Northern Trust polls investment firms that participate in its multi-manager investment programs and funds. The select group of respondents includes fixed income and equity managers across value and growth styles, with a bias toward fundamental, bottom-up stock picking strategies. The survey is conducted quarterly so that Northern Trust and participating managers can examine trends in attitudes and allocations.  For more information, please go to

Northern Trust is a leading provider of multi-manager investment solutions, with more than $37.8 billion under management as of September 30, 2013, for institutional and personal clients. Northern Trust invests with more than 200 external managers worldwide, offering personal and institutional solutions that include retail mutual funds, alternative asset classes, emerging manager programs and total investment program management.

Asset Management at Northern Trust comprises Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Global Investments Japan, K.K.,NT Global Advisors, Inc. and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 18 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2013, Northern Trust had assets under custody of US$5.2 trillion, and assets under investment management of US$846.2 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit or follow us on Twitter @NorthernTrust. 

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