Russell Investment Group released in late December the results of its Investment Manager Outlook, a quarterly polling that aims to collect–from professional money managers–opinions about the direction of the markets, sectors, and asset classes, and potential trends that could impact investment strategy. In the most recent installment of the survey, which was conducted between November 27 and December 5, 2006, Russell polled senior-level investment decision-makers at U.S. large and small-cap equity investment managers, as well as U.S. fixed-income investment managers. The most resonant message among the more than 85 managers polled in this quarter’s survey is the bullishness for U.S. stocks in 2007.

According to the survey, nearly one-third of the investment managers believe that U.S. stocks will rise at least 10%, well ahead of the average 8.4% growth that U.S. stocks have shown for the past 10 years, as measured by the broad-market Russell 3000 Index. In addition, 37% of those polled believe the market is undervalued, the highest percentage ever recorded on this measure in the life of the survey. “Investment managers appear to be expecting a prolonged period of flat to lower interest rates that, in turn, could introduce a period of sustainable economic growth,” said Randy Lert, chief portfolio strategist, Russell Investment Group, in a statement.

As for favored sectors, technology leads, ousting health care, which has had the top spot since June 2004, when the first survey was conducted. According to the poll, manager bullishness for technology increased 11 percentage points this quarter to 67%, while health care dropped six percentage points from last quarter to 59%.

Additionally, the bullishness found in this quarter’s poll was not limited to the U.S. markets, as managers opined that the rest of the world is likely to experience solid economic growth. Furthermore, managers seemed to be more bullish on non-U.S. developed market equities and emerging markets than any U.S. asset class, except for large-cap growth. Sixty-one percent of managers were bullish on non-U.S. (developed market) equities and 54% bullish on emerging markets. Enthusiasm for emerging markets jumped 17 percentage points from the prior quarter.