After a promising first quarter, the economy has stalled souring even the most optimistic investment managers.

“I’m not really a gloomy guy. I’m optimistic by nature,” said Ed Keon, the managing director and a portfolio manager at Quantitative Management Associates, at Prudential’s 2012 Mid-Year Global Markets and Economic Outlook on Tuesday. At the beginning of the year, he had “good expectations” for the economy and the market with the “U.S. starting to show traction” and looking at a “decent chance” of 3% or higher GDP growth. 

All that has since changed, he said. As if on cue, the economy sputtered in the second quarter just as it’s done for the past three years.

“In the spring, the economy slowed down significantly and now it looks like we got stuck in this roughly 2% or so growth,” he said of the U.S. outlook. “It’s also a little disconcerting.... that the most important tool to be a strategist over the last several years is a calendar since it seems we’ve been following the same pattern the last three years: a promising start to the year followed by a slump in the spring and lasting into the summer,” he said.

While the U.S. economy is in a “slow growth period,” it is nonetheless “the cleanest dirty shirt in the laundry,” compared to the rest of the world, he said. Many countries in Europe are in or near recession and the emerging economies of China, India and Brazil have slowed down dramatically from earlier in the year. “The optimism we had at the start of the year has slowly faded as growth expectations faded,” he said.

Still, Keon remains bullish on stocks, predicting high single-digit returns over the next decade.

Michael Lillard, managing director and chief investment officer for Prudential Fixed Income Management, took a positive view of bonds, despite the turmoil in Europe and the looming “financial cliff” in the U.S. He noted that Europe had too many shared interests to allow the Eurozone to collapse. He noted, for example, that half of Germany’s GDP comes from exports and that two-thirds of those exports are with Eurozone members. “We know it’s going to be messy … but at the end of the day we think that the policymakers in Europe are going to find a way to keep it together,” he said.

As to the so-called U.S. “financial cliff” — the budget and debt ceiling negotiations anticipated at the end of the year — Lillard believes that the U.S. government will once again be able “kick the can down the road” and avert a recession at home.

Lillard forecasts 2% GDP growth in the U.S., slower growth in emerging markets and a modest recession in Europe. All told, he expects global GDP growth to be 3%.

John Praveen, managing director and chief investment strategist of Prudential International Investments Advisers, was more cautious in his outlook, saying that the global markets “will remain under the shadow of the Eurozone crisis.” While Praveen concedes that there are a number of tailwinds in the economy’s favor — falling interest rate levels around the world, for example — he cautioned that they are overwhelmed by the situation in Europe.

Praveen insisted that Europe needs to take bolder action than the “incremental steps” it has been taking to resolve its crisis. It needs a “game changer,” such as movement toward “fiscal union” and budgetary consolidation, he said.

The global slowdown hasn’t hurt commercial real estate in the U.S., said Kevin Smith, senior managing director and head of U.S. Business for PREI, a real estate investment firm. Commercial real estate has had three straight years of double-digit returns. Smith cited a number of possible reasons for investors putting money into real estate, including diversification and a “search for yield.” For many non-U.S. investors, real estate represents a safe haven for their cash, he noted.

“Increasingly, you read about large condominiums being purchased in Manhattan or Miami by foreign nationals who are clearly looking for a safe haven to put their money,” Smith said.