Citi: Prepare For The Great Bond Unwind, As Investors Pile Into Stocks In 2010

citistockflows

There’s good reason to expect a giant bond unwind in 2010, according to Citi’s Tobias Levkovich.2009 bond fund flows have been massive , and bond allocations appear stretched. Meanwhile, investors’ stock allocations are at multi-year lows.

Plus, stock valuations appear reasonable. Foreigners have actually been buying U.S. stocks even though Americans have been bearish overall.

Citi: Equity allocation seems light and may need some adjustment. In view of both mutual funds flows as well as equity and credit market rallies, it appears likely that investors remain underweight stocks and a reallocation seems probable especially in light of poor returns from alternatives, particularly private equity investments. To a great degree, a rebound in hedge fund performance has redeemed concerns that money might continue to leave these investment vehicles and assets under management have climbed back meaningfully with modest inflows.

Why investors could shift into stocks for 2010 >>>

[slideshow]
[slide
permalink=”bonds-perform-better-early-in-the-cycle-but-stocks-have-been-better-investments-over-entire-cycles-1″
title=”Bonds perform better early in the cycle, but stocks have been better investments over entire cycles.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2341c10000000000caae17/image.jpg”
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[slide
permalink=”bond-mutual-funds-flows-have-incredibly-outpaced-equity-funds-this-is-likely-reverse-2″
title=”Bond mutual funds flows have incredibly outpaced equity funds – this is likely reverse.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2342210000000000a612ec/image.jpg”
caption=””
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]
[slide
permalink=”bond-fund-inflows-have-gone-out-of-control-they-are-over-2-standard-deviations-above-average-3″
title=”Bond fund inflows have gone out of control – they are over 2 standard deviations above average.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2342310000000000fd5026/image.jpg”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”us-equity-flows-are-well-below-average-theres-a-lot-of-room-for-sentiment-to-improve-towards-us-stocks-4″
title=”U.S. equity flows are well below average. There’s a lot of room for sentiment to improve towards U.S. stocks.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b23424e000000000047b672/image.jpg”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”there-is-still-massive-wealth-in-the-us-5″
title=”There is still massive wealth in the U.S…”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2342840000000000bd991c/image.jpg”
caption=””
credit=””
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]
[slide
permalink=”and-the-sp500-market-cap-looks-cheap-vs-the-amount-of-cash-in-the-non-financial-companies-and-house-hold-deposits-6″
title=”And the S&P500 market cap looks cheap vs. the amount of cash in the non-financial companies and house hold deposits.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2342b100000000001c92aa/image.jpg”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”also-investor-allocation-to-stocks-is-near-2002-lows-7″
title=”Also, investor allocation to stocks is near 2002 lows.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2342db000000000082cc32/image.jpg”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”even-more-so-pension-plan-equity-allocations-are-near-25-year-lows-8″
title=”Even more so, pension plan equity allocations are near 25 year lows.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2342f10000000000020e18/image.jpg”
caption=””
credit=””
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]
[slide
permalink=”meanwhile-foreigners-having-been-buying-us-stocks-9″
title=”Meanwhile, foreigners having been buying U.S. stocks.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2343210000000000184758/image.jpg”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”and-hedge-funds-are-growing-and-back-in-the-game-10″
title=”And hedge funds are growing and back in the game.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b2343340000000000a53680/image.jpg”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”finally-valuations-are-actually-reasonable-11″
title=”Finally, valuations are actually reasonable.”
content=”Source: Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich
image=”http://static.businessinsider.com/image/4b23434500000000007b0d16/image.jpg”
caption=””
credit=””
credit_href=””
]
[slide
permalink=”see-more-via-12″
title=”See more via…”
content=”Via Citi Investment Research, Why Might Someone Buy Stocks?, Tobias Levkovich, 11 December 2009. See the full report for more details, note that these slides are just highlights and don’t provide Citi’s complete view.”
image=”http://static.businessinsider.com/image/4b2672350000000000064e7f/image.jpg”
caption=””
credit=””
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]
[/slideshow]

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