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Investment Manager Pulse
Jul 8, 2021
This quarterly survey of senior investment professionals gauges managers’ views on the economy, financial markets, and risks to their portfolios.
SIRG’s Investment Manager Pulse, Where Professional Investors Are Finding Opportunities, gauges managers’ views on the economy, financial markets, and risks to their portfolios.
A few key takeaways from this quarter’s survey are:
- The global economic growth outlook remains strong; however, there are signs that optimism is starting to peak. Sixty-nine percent of investment managers indicated that they expect the rate of global GDP growth to increase over the next year as economies continue to recover from the impact of COVID, but that percentage declined from last quarter’s record high of 97%. Along the same lines, the median forecast for global growth over the next year was 4.6% versus 5.5% last quarter.
- The recent surge in inflation is expected to be transitory. Core inflation, as measured by the Core Consumer Price Index, for the 12 months ending May 2021 was 3.8%. Looking ahead, investment managers forecast Core CPI to be 2.3% over the next year and average 2.1% and 2.0%, respectively, over the next three- and five-year periods.
- Still more room for rates to rise. Eighty percent believe the 10-Year Treasury yield will rise over the next 12 months, down from 88% last quarter. The median forecast stands at 2.1% vs. the current level (as of June 22) of 1.5%. The median forecast for the 10-Year Treasury yield three years from now remains unchanged from last quarter at 2.5%.
- Managers are most bullish on non-US stocks. Sixty-seven percent of managers are bullish on non-US stocks versus 60% for the US. In particular, investors favor Emerging Markets (73% are bullish) and Europe (71% bullish). This is in sharp contrast to fixed income markets where 63% are bearish, with 83% bearish on Treasuries.
- Still opportunity in cyclical stocks. Financials, Industrials, and Consumer Discretionary remain the three most favored equity sectors. From a style perspective, sentiment is strongest for value and small caps, although less so than last quarter.
- Inflation and the Fed are the top concerns. Investors see rising long-term inflation expectations and/or a more hawkish-than-expected Federal Reserve as the top risks to their portfolios. Concern about the threat posed by COVID variants also increased from last quarter.
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This report is produced by the Strategic Investment Research Group (SIRG), a unit of PGIM Investments LLC, and a research unit of Prudential Financial. SIRG provides research, analysis, and due diligence on investment management firms and the vehicles and strategies they offer.
The SIRG Investment Manager Survey collects the insights and opinions of senior investment professionals from across the asset management industry.
This report provides an in-depth analysis of their collective views on the economy, financial markets, and other relevant issues affecting the investment community.
To ensure independence and objectivity, professionals in Prudential/Prudential-affiliated firms were not included in the survey.
A total of 78 investment managers responded and are included in this analysis. Data was collected between June 3 and June 28, 2021.
GDP - The monetary value of all the finished goods and services produced within a country’s borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well. GDP includes all of private and public consumption, government outlays, investments and exports minus imports that occur within a defined territory. Core Consumer Price Index
(CPI) (ex-Food & Energy) - measures the movement of prices for all items, excluding the two most volatile components (food and energy) of the overall CPI.
The information contained herein has been obtained from sources that Prudential Financial believes to be reliable. Prudential Financial does not guarantee the accuracy or completeness of data received from outside sources, including investment managers.
© 2021 Prudential Financial, Inc. and its related entities. PGIM Investments, PGIM, and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
Investing involves risks. Some investments have more risk than others. The investment return and principal value will fluctuate and the investment, when sold, may be worth more or less than the original cost and it is possible to lose money. Past performance is not a guarantee of future results. Since no one manager/investment program is suitable for all types of investors, this material is provided for informational purposes only. Fixed income investments are subject to interest rate risk, where their value will decline as interest rates rise.
Since no one manager/investment program is suitable for all types of investors, this material is provided for informational purposes only. Fixed income investments are subject to interest rate risk, where their value will decline as interest rates rise.
This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional
Indices are unmanaged and an investment cannot be made directly into an index.
For financial professional use only.
1041151-00004-00 Ed. 7/2021