AXA Rosenberg, an AXA Investment Managers company specializing in quantitative active global equity asset management, announced that a majority of institutional investors and consultants associated with more than $850 billion in investable assets believe the US economy faces significant headwinds as it moves towards 2008, and growth will trail Asia (ex-Japan), Japan, and Europe.

More than 35 institutional investors and consultants, representing corporate pension funds, public pension funds, foundations, and consultants were surveyed by AXA Rosenberg at its North American conference held on Tuesday, October 9, in New York City. The institutional investors and consultants were asked a series of questions to gauge their current outlook on a number of regional and global market and economic issues.

AXA Rosenberg Americas chief investment officer Bill Ricks noted, "Earnings drive valuation, and the investors and consultants we surveyed believed that the growth of corporate profits in the US will weaken this coming year. They further thought that the United States will lag behind Asia, Japan, and Europe in economic growth, the growth of corporate profits, and stock market performance." Mr. Ricks concluded, "The implications of this forecast for corporate profits, if it indeed plays out as predicted by this group, could be bearish for US equity markets. We believe this environment would reward investors who focus on stocks with sound fundamentals."

Among the findings of the AXA Rosenberg survey were:

Current economic and market environment

- 65% of respondents believed the US economy will weaken in the next 12 months, comprised of 48% stating that the economy will weaken "a little" and 17% stating that it will weaken "a lot"

- 67% termed the US economy as "late cycle"

- 67% believed market volatility in 12 months will be higher than at present

- 57% believed US core inflation will be higher in the next 12 months, comprised of 48% saying it would be "slightly" higher and 9% saying it would be "a lot" higher

- 55% said US monetary policy was "about right," but a significant minority (36%) termed policy "too stimulative"

Respondents favored regions outside the US for equity market valuations and currencies

- 43% called the US equity markets "overvalued," and the same percentage, 43%, called the market "fairly valued," while 13% said "undervalued"

- 50% rated Japan as the most undervalued equity market, followed by Europe and Asia (ex-Japan) both at 20%, and the US at 10%

- 87% believed the US dollar will be the weakest currency, as compared to the Pound, Euro and Yen

Corporate profits

- 60% said that they believed that corporate profit growth in the US would be lower over the next 12 months

- 38% said that the US will have the weakest regional growth in corporate profits

- No respondent believed the US would have the strongest regional profit growth in the next 12 months

- 65% cited Asia (ex-Japan) as expecting the strongest growth in corporate earnings, followed by Japan at 20%, and Europe at 15%