Some 84 per cent of institutional investment managers expect corporate earnings to increase in the coming quarter and 84 per cent believe that global growth will accelerate in the next six months, according to a poll by Northern Trust Global Advisors.

The NTGA survey showed the most optimistic economic expectations from investment managers since the quarterly poll was begun a year ago. But managers, still hesitant to call a buoyant V-shaped recovery, see potential fragility in the system.

Three-quarters (76 per cent) of survey respondents expect interest rates to hold steady, reflecting a view that central banks will be hesitant to raise interest rates for fear of choking off early signs of recovery.

The survey also found that at 46 per cent of responses, a plurality of managers still believe that the Standard & Poor's 500 Index, a broad US market indicator, is undervalued. The group of managers who believe that the market has room for growth is more than double the size of those (20 per cent) who believe the market is overvalued.

Reflecting a stabilization of portfolio positioning, 53 per cent of managers answered that they have no change in risk aversion and 88 per cent of managers say they are now within their normal range of cash holdings. This is in contrast to responses from previous quarters, when managers continued to increase risk and decrease cash positions at the margins.

Ahead of the late September announcement by the Federal Reserve to keep the main US interest rate unchanged, 75 per cent of respondents expected interest rates to remain the same for the next quarter.

At 53 per cent, the majority of managers now expect global inflation to remain the same for the next few months, compared to 42 per cent who expressed the same opinion in the previous quarter.

Investment managers specifically cited the technology, energy, industrials, healthcare, and materials sectors as their top five most attractive market segments. The materials sector made its first appearance on the top-five list, edging out consumer discretionary.

"We found it interesting that managers expressed strong optimistic expectations for global growth and corporate earnings while at the same time expressing expectations for a stable inflationary environment," says Chris Vella, global director of research at NTGA. "Though growth and inflation generally arrive hand-in-hand, multiple managers cited the excess production capacity unearthed in their company research that would counteract any near-term inflationary pressures."