Among the good news in Northern Trust Asset Management’s quarterly market outlook survey, the vast majority (84%) of asset managers believe that weakness in emerging markets has “less than a 25% probability of turning into a global recession over the next year.”

Retirement plan investors could be forgiven for thinking otherwise after yet another week of whipsawing markets that at one point saw the bluest of blue chip indices, the DJIA and S&P 500, both approach 20% losses measured year on year. And indeed, “a potential slowdown in emerging-market economies” remains the top concern identified by investment managers, while expectations around U.S. economic growth and corporate earnings also continue to be low for the short term.

For the second consecutive quarter, investment managers ranked a slowdown in emerging markets as the biggest risk to global equity markets over the next six months. U.S. corporate earnings ranked as the second-highest risk to equity markets, and a slowdown in the U.S. economy ranked third, up from sixth place in the prior quarter, Northern Trust explains.

According to Christopher Vella, chief investment officer for multi-manager solutions at Northern Trust, a lower percentage of managers expect U.S. corporate earnings, job growth or GDP to accelerate than has been the case for a number of years. “Most managers still expect U.S. economic activity to remain stable,” he observes, “but this change in expectations is worth monitoring going forward.”

The survey of approximately 100 money managers, taken throughout December 2015, also sought views about the expected market reaction to extended low oil prices—and the U.S. Federal Reserve’s likely course on interest rate hikes. “Although most managers surveyed (53%) expect corporate earnings to remain the same, more managers expect earnings to decrease than increase (24% to 23%) over the next 6 months,” the survey report notes. “On the U.S. economy, those who expect an increase in U.S. GDP over the next six months fell to 23%, down from 54% in the second quarter of 2015. Sixty-four percent of respondents expect U.S. GDP growth to remain the same over the next six months.”

With all this in mind, more than two-thirds (68%) of managers still expect the Fed will continue to raise rates with a series of small increases. About 20% expect the Fed will hold off on any further increases after its December rate hike, given the current volatility and other global economic factors.

NEXT: More on the slippery price of oil

“In December, with oil prices falling below $50 per barrel, managers were asked how sustained prices at that level would affect U.S., developed non-U.S. and emerging markets equities,” Northern Trust explains. “Nearly half (49%) expect low oil prices to have a negative impact on emerging market equities, and 45% said there would be a positive impact on developed non-U.S. equities. For U.S. equities, 25% expect a negative impact, with the rest divided between positive and neutral.”

Looking at portfolio positioning, there has been a somewhat modest increase in the percentage of managers identifying as “more risk-averse,” at 22%, up from 17% in the third quarter of 2015. Just over two-thirds of managers expect volatility to increase in the U.S equity market over the next six months.

“Even with lower energy prices, more than half of the managers maintained the same level of commodities exposure as the prior quarter,” notes Mark Meisel, senior investment product manager for multi-manager solutions at Northern Trust. “About an equal percentage of managers added to their commodities position as lowered their exposure. More generally, increased market volatility for some managers has led to increased risk-aversion but most managers have not altered their portfolios.”

This is a key lesson for retirement plan investors to absorb: Managers are not reacting emotionally to the currently swings in equity prices, opting instead to focus on the underlying fundamentals. In fact, according to asset managers in the survey, “non-U.S. equity markets are viewed as having the most attractive valuations.”

For example, 54% say European equities are undervalued, and 52% see emerging market equities as undervalued. U.S. equities are seen as undervalued by just 21% of managers, “the lowest percentage since the survey began in the third quarter of 2008,” Northern Trust explains. “Forty-one percent of investment managers view U.S. equities as overvalued, up from 37% in the third quarter.”

When it comes to picking winners and losers in the equity markets, information technology has a bullish rating from 68% of managers, followed by financials, at 38%.

The full Investment Manager Survey Report and a video on survey highlights can be found on Northern Trust’s web site at www.northerntrust.com/managersurvey.