Investment managers expect corporate earnings to increase in the next three months, according to the second quarter 2009 Northern Trust Global Advisors (NTGA) survey of investment managers. A majority of investment managers expect global GDP growth to accelerate in the next six months, revealed the survey.

Over half (58%) of managers expect global inflation to increase in the next six months, compared with 17% in the last quarter. Over a third (39%) said corporate earnings will increase in the next three months, compared with only 1% in last quarter. Over a quarter (29%) believed corporate earnings will stay the same while 32% believed they will decrease in the next three months.

The survey revealed a dramatic decline in managers who believed the market as represented by the S&P 500 was undervalued. In contrast to first quarter of 2009, when almost 80% thought the S&P 500 was undervalued, only 51% held that view in the second quarter.

Over three quarters (79%) of managers are more willing to assume risk and participate more fully in the markets and said they were either less risk averse or had no change in their risk aversion in the last three months.

Over a third (39%) believed corporate earnings will increase in the next three months, compared with 1% who believed the same in the previous quarter's survey.

US small cap equity was ranked as the most attractive investment opportunity, unchanged from the previous quarter.

In a sign that managers are now willing to take more risk, second place emerging market equity and seventh place emerging market debt climbed in rankings from the previous quarter.

Investment managers cited technology and energy as their top two most attractive market segments, followed by healthcare, industrials and consumer discretionary products. Industrials made its first appearance on the top five list edging out consumer staples.

The survey of over 70 institutional managers was conducted by NTGI. In mid-June NTGI polled a group including fixed income and long-only equity managers across value and growth styles, with a bias toward fundamental, bottom-up stock picking strategies. The survey is conducted quarterly.

Northern Trust Corporation provides investment management, asset and fund administration, fiduciary and banking solutions for corporations, institutions and affluent individuals. NTGI is the multi-asset class investment management business of Northern Trust Corporation. It comprises Northern Trust Investments, Northern Trust Global Investments, Northern Trust Global Investments Japan, the investment advisor division of the Northern Trust Company and Northern Trust Global Advisors and its subsidiaries.