Here's an interesting but completely useless data point: A survey of 254 money managers conducted by Russell Investments found that 42% of them believe that U.S. stocks are undervalued, up from 34% three months ago. Two-thirds are expecting stocks to provide a positive return this year, although that number is down from three months ago, probably due to the market's rough opening to the year.
What does it all mean? Beats the hell out of me. If anything, this survey could be viewed as a contrarian indicator. The 42% who believe that stocks are undervalued have, presumably, already bought close to the amount of stock that they can -- their money won't be flowing in to give the market a boost. All that those bullish money managers can do now is hold or sell.
The Wall Street Journal quotes (subscription required) Erik Ristuben, managing director, client investment strategies at Russell Investments, as saying, "clearly don't believe that the likely scenario is going to be as bad as what's already priced into stocks."
But the problem is that what the majority of money managers believe is already priced into stocks! If they're feeling bullish and buy, the market goes up.
So this survey, like nearly every market predictor, should probably be discarded as useless. I certainly wouldn't go buy stocks because 42% of money managers think they're undervalued.
Money managers think stocks are undervalued: Who cares?
Posted Mar 26th 2008 3:55PM by Zac Bissonnette
Filed under: Analyst reports
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Reader Comments (Page 1 of 1)
3-26-2008 @ 5:01PM
Michael Schneider said...
This would mean 58% are bearish or neutral and hence may have money to put to work. I agree though that it is hard to find much meaning from a survey of money managers without more of the historical data. I tend to dislike sentiment indicators usually unless they really really really get stacked in one direction. The same is true about consumer sentiment readings though now they are negative enough to correlate with some behaviors-- there was an analyst on CNBC yesterday talking about how the sentiment readings yesterday were very bearish for oil prices. Oil jumped today though, apparently not paying attention to consumer sentiment. Part of the problem-- high oil prices may make people feel bad about driving but they have more negative feelings about changing their behaviors too fast.
3-27-2008 @ 9:04AM
m gross said...
People are going to cut back on little luxuries long before they cut back on oil use. How many people simply drive around for the fun of it? (Not in Chicago, anyway!)
People drive to work or school, or for groceries. These things are tough to give up, and there are few alternatives. In fact, given the increases in local taxes, here, it works out cheaper to go shop in the suburbs and stock up. Until gas really gets prohibitive, we will simply cut out trips to McD's, eat at home, and delay larger purchases.