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Bond-Heavy Investors Want To Put Their Money In Equities (The Wall St. Journal)
Bond-heavy investor are looking to shift some of their assets into equities as they realise that they’re carrying too much risk and missing out on returns. Financial advisors are helping their clients buy shorter-duration bonds, high-quality mortgage-backed securities, structured credit and stocks.
Cooling yields and strong S&P 500 performance is contributing to this shift in sentiment, Todd Morgan, senior managing director and adviser at Los Angeles-based Bel Air Investment Advisors LLC, told the WSJ.
“Now, they’re seeing that the stock market gave a very good return last year and in January, and they’re becoming more hopeful and optimistic that they can put their toe back into the global market or increase their presence,” he said.
The Great Rotation Is Just A Giant Misunderstanding (Business Insider)
January was a record month for flows into equity mutual funds. But that doesn’t mean there’s a “Great Rotation” from bonds to stocks going on.
According to Citi Investment Research, a significant portion of the record flows into equities came from the mad rush of special dividends paid out by big companies to shareholders ahead of the scheduled expiration of certain Bush-era tax cuts.
Photo: Citi Research, BEA, SAAR, Fed H.8
According to the BEA, those special dividends also accounted for the unexpected surge in personal income growth in December.
US Stocks Are Expensive Right Now (Goldman Sachs Asset Management)
The US, Australia and Mexico stock markets are not cheap right now, according to Goldman Sachs’ Jim O’Neill. US market indexes are reaching all-time highs, so this might be a bit obvious.
“Such a cautious approach does not mean these or any markets will stop rallying but it is a sign to be careful and that these markets could be especially vulnerable to disappointing and surprising news,” said O’Neill in a note, adding, “Many other markets do remain quite cheap, including the other seven of our so-called Growth Markets, as well as Japan and much of continental Europe. This explains why, as I have been suggesting, I would still concentrate my bullishness there.”
Raymond James strategist Jeff Saut says that this is the 23rd day of a “buying stampede,” that will probably last just till February 12th, the day President Obama is scheduled to give hs State of The Union Speech.
“That address will likely be viewed negatively by the equity markets, which should serve to finally bring about a 5 – 7% correction. How the stock market reacts following such a pullback will tell us a lot about the market’s future direction. In the interim I favour the upside with the caveat that this rally is long of tooth,” said Saut in a note.
Business Cycle is Bullish On Stocks And Commodities (Advisor Perspectives)
In each business cycle there cyclical turning points for bonds, stocks and commodities—peak, fall, bottom out, rise, and so on. Between December and January, the economy skipped from Stage II, which is when stocks begin to recover, to Stage IV, which is when demand for credit causes bond prices to peak, according to Advisor Perspectives’ Martin Pring.
“That means that the current environment is negative for bonds but positive for the other two asset classes (stocks and commodities),” said Pring in a note.
Photo: Advisor Perspectives
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