Enthusiasm for the markets has waned since the end of last year, as money managers take a wait-and-see approach on economic recovery, according to Russell Investments.

The company, in its quarterly Investment Manager Outlook, found that managers were significantly less bullish on non-U.S. equities and were still waiting for a level of economic growth that would indicate a sustained upswing for equities.

Russell surveyed 180 professional money managers.

"The market pain experienced during the global financial crisis is still very vivid, and investment managers are reacting strongly to any negative news-whether it be the developments in Greece or the marginally negative economic reports that began the year in the United States," said Erik Ogard, director of client investment strategies at Russell Investments.

The survey found, for example, a 21 percentage point drop in managers' bullishness for non-U.S. (developed market) equities.

The two sectors most directly linked to consumers sentiment-consumer staples and consumer discretionary-were the sectors managers liked the least in the survey.

Managers were most bullish about technology (79%), materials and processing (49%) and energy (47%)-sectors closely linked to business activity and economic growth.

Seventy-seven percent of managers believed unemployment will remain at 8% or higher at the end of 2011, and 96% believe that unemployment will be at least 7%.

"High unemployment numbers have effectively stifled consumer confidence and spending. Most managers believe that the economic recovery will continue to be led by business spending rather than consumer spending," said Ogard.

He added, however, that managers are not in retreat, and that their bullishness is still near the average levels from before the great financial collapse.

Twenty-eight percent of the managers surveyed believe the market to be undervalued, a steep drop from the 57% figure in the March 2009 Investment Manager Outlook but an increase from the survey low of 19% seen in December 2009. The number of managers believing the markets to be overvalued declined from 18% in December 2009 to 13% in this survey.