Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Correction in global stocks likely, funds trim equity allocations: Reuters poll

Stock MarketsAug 31, 2021 07:46AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Bull and bear symbols are seen in front of the German stock exchange (Deutsche Boerse) in Frankfurt, Germany, February 12, 2019. REUTERS/Kai Pfaffenbach

By Tushar Goenka

BENGALURU (Reuters) - A modest correction in global stock markets is likely by the end of this year, according to a slim majority of fund managers polled by Reuters who recommended trimming global exposure to equities in August in favour of bonds.

On Monday, MSCI's benchmark for global equity markets hit historic highs and European shares, with a monthly gain of more than 2%, were on track to clinch their longest winning run in over eight years, buoyed by pandemic-related monetary and fiscal stimulus.

Still, fund managers and chief investment officers in Europe, Japan and the United States polled Aug. 12-30 slightly cut recommended equity allocations to an average 49.9% of their model global portfolio from a 3-1/2 year high of 50.1% in July.

The findings precede an expected inflection point in the Federal Reserve's monetary policy, with diverging views amongst officials on the precise timing of when a tapering in the Fed's $120 billion of monthly bond purchases will begin.

Asked about the likelihood of a correction in global equity markets by the end of this year, a narrow majority of respondents - nine of 17 - said it was likely, while the others said it was unlikely.

A separate Reuters survey of over 250 equity market strategists found this year's blistering global stocks rally is nearly over, and a correction was likely by end-year.

"A growth scare from rising coronavirus infections and a slowdown in reopening activity could spook domestic markets into a modest correction," Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management in Seattle, Washington, said.

"We would anticipate this is more of a growth scare than risk of a recession or significant slowdown given the amount of stimulus still working through the economy."

Of those who said a correction was likely, the poll median forecast stock prices to drop 8% with predictions ranging 5%-10% in the latest survey.

But fund managers reiterated that most of the recent drops in stock prices proved to be opportune moments to increase exposure to risky assets taking advantage of rock-bottom interest rates and the resultant liquidity.

Asked about the most likely change in model portfolio recommendations over the next three months, 10 of 19 respondents said they would increase exposure to equities.

The remaining respondents said they would decrease exposure to either equities or bonds. None said they would increase their bond holdings.

"We might increase our equity exposure, but we are now in a stock picker's market. It is a question of 'what you own in the market rather than owning the market'," said Peter Lowman, chief investment officer at Investment Quorum in London.

Dec Mullarkey, managing director, investment strategy at SLC Management in Boston, reiterated the widespread view that for returns, equities are the only game in town.

"We might think things cannot get any better from here, but when we look relative to other asset classes, even for normal, reasonable and modest performance from here, it is still going to be kind of a healthy outcome," he said.

Reuters poll graphic on global asset allocation outlook: https://fingfx.thomsonreuters.com/gfx/polling/zgpommlxdpd/Global%20AA.png

Still, the latest poll found bond holding suggestions were increased to account for 39.7% of the balanced global portfolio, up from last month's 39.3%.

Chief investment officers on the whole tend to be more prudent with their allocations in a setting where monetary policies are bound to be tighter.

Even 18 months after the onset of the pandemic, new variants and the damage they carry remains a top risk to fund managers' portfolio positioning, along with any sudden tapering in monetary stimulus by central banks.

(Reporting and Polling by Tushar Goenka in BENGALURU and Fumika Inoue in TOKYO; Additional reporting by Hari Kishan; Editing by Ross Finley and Barbara Lewis)

Correction in global stocks likely, funds trim equity allocations: Reuters poll
 

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.
Comments (1)
Meru Pet
Meru Pet Aug 31, 2021 8:10AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
very euphemistic :D
 
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
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email