Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Global funds once again opt out of stocks, despite rally, Reuters polls show

Economy Sep 04, 2020 10:55PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington

By Rahul Karunakar and Tushar Goenka

BENGALURU (Reuters) - Funds recommended equity holdings be trimmed to the lowest in over four years in August, despite record-breaking gains by world stocks, as the pandemic drags on and new data suggest the nascent economic rebound is stalling, Reuters polls found.

The August 17-27 poll of 35 fund managers and chief investment officers in the U.S., Europe, Britain and Japan was largely taken before Federal Reserve Chairman Jerome Powell announced a new policy framework promoting higher inflation to spur economic recovery and job creation on Thursday.

The Fed's new strategy sent U.S. Treasury yields higher, which gave a lift to interest rate-sensitive financials and in turn boosted the S&P 500 index to a new record high and pushed the MSCI's all-country world index to surge past its pre-COVID-19 high reached in February.

While world stocks have risen as much as nearly 60% since March troughs, the poll showed average recommended exposure for equities in August in the model global portfolio was the lowest since July 2016, down to 43.1% from 43.9% the previous month.

Overall equity exposure is down 6.6 percentage points from the beginning of the year, down from 49.7% in January.

"The recent upsurge in stock markets around the world is all noise for us as a health solution is still out of reach. We are more concerned about the recovery story. The risks to the global economy remain, with tens of millions of people still out of work because of the pandemic," said a global chief investment officer at a large U.S. fund management company.

"The stock market in the near term may be juiced further on the Fed news. But we doubt whether the Fed would be able to lift inflation despite the new target as it hasn't been able to do so since 2012. Let's not forget, the U.S. economy is still in a deep crisis, and the risks are more to the downside as Americans prepare to vote in a contentious Nov. 3 election."

Economic recovery was foremost in Powell's remarks made as part of the Kansas City Fed's virtual Jackson Hole symposium, in which he outlined an aggressive new strategy that aims to boost employment and allow inflation to run a bit faster for longer than in the past.

That came as new data suggest the labour market recovery is stalling, while the U.S. economy suffered its sharpest contraction in the second quarter since the government started keeping records in 1947.

The poll suggested keeping bond allocations - a key gauge of caution - for a model global portfolio at 44.3%, the highest since the survey series started in early 2010, for the third month in a row.

That defensive outlook of long-term investors does not align with the approach of over 200 equity strategists in a separate Reuters poll this week, who expect stocks to keep rising. But they did say a sombre economic outlook was likely to push stock markets to close the year below their pre-pandemic highs. [EPOLL/WRAP]

In the latest poll, fund managers with a view on when the current bull run in stocks will end were split. About 43% of respondents, or nine of 21, said it already had. Seven, or 33%, said it has over two years to run.

"This recent bull market rally has been narrow in respect to sector rotation with the economically-sensitive stocks having lagged whilst uncertainties over the second wave of COVID-19 haunts part of the market," said Peter Lowman, chief investment officer at Investment Quorum in London.

"Nonetheless, central bank policy remains supportive and therefore the equity markets are likely to continue their upward trajectory but with some corrective periods along the way."

But responses to a separate question suggested fund managers were still cautious in their approach.

Asked what is the most likely change to their portfolios, over 85% of the fund managers, or 18 of 21, said they would "roughly maintain the current risk positioning". Those views were broadly unchanged from the July survey.

"This crisis is already telling us that it will not be a neat and tidy economic global downturn followed by an equal and opposite neat and tidy upturn, like one might see in a traditional economic cycle," said Mark Robinson, chief investment officer at Bordier & Cie (UK).

"There are clearly still many uncertainties related to the virus itself and uncertainty about the scale and shape of the recovery, so some caution is still rightly warranted."

(Reporting and polling by Rahul Karunakar and Tushar Goenka; editing by Ross Finley, Larry King) 2020-08-28T121251Z_1_LYNXMPEG7R0ZT_RTROPTP_1_USA-FED-JACKSONHOLE.JPG

Global funds once again opt out of stocks, despite rally, Reuters polls show
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email