Weekly Market Review
In this recap, we summarize market performance and market moving news from the prior week.
Investment Manager Pulse
Oct 20, 2023
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 See Potential Opportunities, gauges managers’ views on the economy, financial markets, and risks to their portfolios.
MOST INVESTMENT MANAGERS NOW EXPECT U.S. ECONOMY TO ACHIEVE A SOFT LANIDNG
Key Takeaways from the Strategic Investment Research Group’s Quarterly Investment Manager Survey:
- Economic growth is expected to slow from here, but most now think the US can avoid a recession. Seventy-eight percent of investment managers expect the pace of economic growth to slow over the next 12 months. However, economic growth has been more resilient than many feared earlier in the year. This has led to an upward revision to expected 12-month GDP growth from 1.0% to 1.4%, still a notable slowdown from 2022’s 2.1% year-over year growth rate. While recession odds remain elevated, 61% now expect the Fed to tame inflation without tipping the US economy into a recession, up from only 43% last quarter.
- Inflation is expected to reach the Fed’s 2% target some time next year. Eighty percent of managers expect core inflation to fall over the next 12 months. Most (60%) believe core PCE inflation will reach the Fed’s target by the end of 2024.
- Investment managers continue to get more bullish on fixed income. Government bond yields have continued to climb in 2023. Sixty-nine percent of managers now expect the US 10-year Treasury bond yield to fall over the next year, which would be a tailwind for bond prices. Sixty-four percent are bullish on US investment grade bonds, a new high since we started collecting this data in 2014.
- Sentiment towards US stocks remains muted. Only 26% are bullish on US equities. An equal percentage are bearish. While sentiment towards earnings over the next 12 months has improved at the margin, 60% view the asset class as overvalued. Instead, managers are more bullish on Japanese and Emerging Markets equities.
- AI and Tech are viewed as a crowded trade. Fifty-five percent of investment managers view AI and Tech as a potentially crowded trade. However, sentiment towards the tech sector remains strong with 56% of managers still bullish, vs. 54% 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.
A total of 52 investment managers responded and are included in this analysis. Data was collected between August 30th and September 20th, 2023.
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 PCE Inflation - A measure of price changes in consumer goods and services similar to the consumer price index (CPI). Personal consumption expenditures consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, non-durables, and services but does not include volatile food and energy prices.
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.
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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.
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