If there's any silver lining to the stock markets' recent pummelling, it's that U.S. equity markets might be undervalued, according to a survey of investment managers by Russell Investments.
Russell's most recent quarterly outlook on money managers found that 42% of respondents believe that U.S. markets are undervalued, up eight percentage points from one quarter ago and double the number from one year ago.
And a majority expect that bargain hunting will pay off before year-end, as 66% of the 250 managers surveyed believe that domestic equities will finish 2008 in the black. Nonetheless, that's down 10 percentage points from the prior quarter. And 26% believe the market will end the year up more than 10%, which is down from 30% from the prior quarter.
The managers see opportunities in the commodity sectors, particularly in natural gas distribution, the integrated oils, and in materials and processing.
"The same sectors that managers link to commodities are the ones most highly leveraged to economic activity-a fact which underscores the managers' larger belief in a turnaround for the markets and the economy in the second half of the year," says Erik Ristuben, Russell's managing director of client investment strategies.