Money managers see opportunities in stocks
NEW YORK -- Despite worries on Wall Street that the weak economy will fall back into recession and drag stocks down more, eight of 10 money managers believe the USA will avoid a double dip, a survey of investment managers by Russell Investments to be released today found.
The fear of another downturn, just two years after the end of the Great Recession, has been a big factor in the stock market's swoon since its April high and the wildest price swings in history.
But the message being sent by 79% of the 102 money managers in the quarterly survey who say another recession is unlikely is there might be more opportunities to make money in stocks than gloomy headlines suggest.
"Money managers recognize that it was an indiscriminate sell-off, and a lot of good companies saw their stocks go down (too far)," says Rachel Carroll, client portfolio manager at Russell Investments. "If you can weed through the carnage, you can find companies with great prospects selling at low valuations. They see a buying opportunity."
In fact, 57% of money managers say U.S. stocks are "undervalued," up from 26% in the June survey.
Wednesday, the Dow Jones industrials fell 180 points, or 1.6%, to 11,011, leaving it 14% below its 2011 peak.
Despite a spate of negative news about the economy, Europe's debt woes and political division in the U.S. over how to trim the deficit, professionals with long-term horizons see opportunity, Carroll says.
The main reasons cited for ruling out a double dip: strong corporate balance sheets and profits (79%), the central bank's decision to keep interest rates low (49%) and falling oil prices (35%).
But few money managers expect the U.S. economy to grow at a rapid rate anytime soon. In fact, 62% expect growth to remain slow for years.
Almost three out of four said they are bullish on emerging markets stocks (74%) and large-company U.S. stocks (73%). They are bearish on defensive holdings, such as cash and U.S. government bonds. "What the managers are saying is that there are better opportunities out there if you can weather the volatility," Carroll says.
Not all the managers had a bright outlook. In fact, 10% said the USA is already in recession, and 11% said it would eventually succumb to a double dip. Asked what it would take for the U.S. to avoid or emerge from recession, nearly all (95%) said a recovery in the jobs market.
Other keys to economic recovery: improving consumer confidence and consumption (45%), a resolution of the political and policy issues related to the ballooning deficit (40%) and a successful resolution to the European debt crisis (40%).
Related Stories
ABC News Live