Money managers expect the economy to slow down or remain flat over the next year, but they don't think the slump will lead to a recession, according to a new report.
   As a result, large-cap growth remains the most popular asset class among managers, albeit to a lesser degree than last year, according to Russell Investment Group's Investment Manager Outlook, a quarterly poll of managers.
   "The economic slowdown appears to be strong enough to dampen inflationary forces, and the managers clearly believe that the Federal Reserve Board has engineered a soft landing for the U.S. economy," said Erik Ristuben, Russell's managing director of client investment strategies.
   "Every sign is pointing to an economy in the mid-stage of an economic cycle, and the markets are preparing for a sustained period of 'average' economic growth in which stocks will perform in line with long-term market expectations," he said.
   The expectations have lessened the bullishness of managers over the past year, according to the report.
   Even though managers still pick large-cap growth as their favorite assset class, for example, that bullishness has gone from 80% of managers in fourth quarter 2005 to 50%.
   In fact, according to the report, only two asset classes generated positive sentiment above 50%: large-cap growth and non-U.S. (developed market) equities, which was supported by 52% of surveyed managers.
   The popularity of large-cap value, meanwhile, dropped 21% from last quarter.
   "In the current environment, managers may be putting more value on the choice of individual stocks than in which sectors they might be," Ristuben said. "Nevertheless, most managers remain convinced that it is only a matter of time before large-cap growth stocks take off."