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Investment Manager Pulse
Apr 13, 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:
- Economic outlook continues to improve. Ninety-five percent of investment managers expect US GDP growth to increase over the next 12 months. Fifty-eight percent believe the increase will be “significant,” up from 34% last quarter. Accordingly, the median estimate for GDP growth over the next year was revised meaningfully higher this quarter, from 3.7% to 6.0%.
- Increasing near-term inflation expectations. Ninety-two percent expect core CPI to increase over the next year, up from 84% last quarter. The median forecast is currently 2.0% compared to the latest Y/Y core CPI of 1.3% in February.
- Still more room for rates to rise. Eighty-eight percent believe the 10-year Treasury yield will rise over the next 12 months, up from 84% last quarter. The median forecast stands at 2.0% vs. the actual yield of 1.7% as of March 31. Longer-term forecasts were also revised higher. The 3-year estimate increased from 1.8% to 2.5% this quarter while the 5-year estimate rose from 2.2% to 2.5%.
- Bullish on stocks, bearish on bonds. Managers view both US stocks and bonds as expensive but continue to favor stocks given the growth outlook. They are most bullish on emerging market equities (77%), but a bit less so than last quarter. Sixty-one percent are bullish on developed market international equities and 60% on US equities. Sentiment improved sharply for commodities, with 71% bullish (up from 50% last quarter) with rising inflation expectations. Only 8% are bullish on fixed income, but they’re finding pockets of opportunity in bank loans and emerging market debt.
- Big rotation towards cyclical sectors and styles. Consumer Discretionary, Industrials, and Financials remain the three most favored sectors. Bullishness towards the Materials and Energy sectors improved sharply, while sentiment towards Technology continued to moderate. From a style perspective, Value and Small Caps remain heavily favored at the expense of Growth and Momentum. In fact, optimism for Value and bearishness for Growth are at all-time survey highs.
- Beware the taper. Last quarter, 48% cited rising COVID infections as the top risk facing investors versus only 14% this quarter. Instead, a repeat of the infamous 2013 “Taper Tantrum” is now top of mind followed closely by the potential for an inflation overshoot.
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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 65 investment managers responded and are included in this analysis. Data was collected between March 2 and March 15, 2021.
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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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
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For financial professional use only.
1041151-00003-00 Ed. 04/2021