Asset managers in the US surveyed by Russell Investments have little to be excited about for the rest of 2008. They are bracing themselves for a difficult remainder of 2008, caught in between believing the economy is not entirely out of the woods but that a serious recession is not inevitable.

ôLike a football team prepared to grind it out yard by yard, investment managers are gathering their resolve to face tough economic opponents in 2008, still hopeful that equity markets will improve and theyÆll end the year in positive territory,ö says Erik Ristuben, US-based CIO for multi-strategy solutions at Russell Investments.

The signs point to a classic, persistent, mid-cycle slowdown.

ôManagers donÆt expect a miracle play to improve the situation. To overcome the economyÆs present trials and earn money in the capital markets will require careful stock selection, patience, and discipline to a game plan. Those who stick it out may be rewarded, and then perhaps only by the narrowest of margins,ö Ristuben adds.

In the latest Investment Manager Outlook, a quarterly survey conducted by Russell Investments, manager bullishness fell steeply for the classically defensive health care and consumer staples sectors, hinting that caution û not fear û is driving the markets.

Manager bullishness for the healthcare sector dropped 17 percentage points from 71% to 54% from last quarter, and bullishness for the consumer staples sector fell 10 percentage points from 47% to 37% over the same period.

For this quarter, manager bullishness fell for a majority of equity sectors, and not one sector moved up more than five percentage points.

"Relatively slow economic growth and muted corporate earnings have dampened manager enthusiasm for the near-term, but they remain guardedly optimistic for an economic and market recovery,ö says Bruce Pflaum, Russell's Singapore-based managing director for its Asian operations.

Managers identified a slowing economy as the most significant potential threat to market performance during the second half of 2008. While 46% of surveyed managers had economic growth top of mind, 40% were monitoring inflation, and 38% thought both the credit markets and energy costs could still wreak havoc in the markets.

"The good investment managers are always mindful of how and why the road can become rocky, but investors can find comfort in economic indicators that currently are not overly worrisome. Core inflation remains under control, consumers continue to spend and unemployment is relatively low," says Pflaum. "Managers know the economy and markets are ugly now, but they also know it's time to put their heads down and grind it out."

Russell Investments conducted the survey between May 29 and June 6. The survey was sent to a group of US large- and small-cap equity and US fixed-income investment managers. In total, 335 survey responses were received representing 241 investment management firms. On average, the companies that responded individually manage an estimated $107.5 billion in assets. A majority of respondents to the survey have senior-level investment decision responsibilities, notably portfolio managers or CIOs. Other participants included investment strategists and research analysts.