Golman Sachs recently polled over 800 clients at their Global Macro Conference in regards to asset classes they liked and the risks they worry about most.
A full 38% selected Equities as the asset class they are ‘most positive or overweight’, while just 18% chose Commodities, 15% Cash, 14% Alternatives (hedge funds/private equity), 10% Corporate Bonds, and 5% Government Bonds. This seems to be the exact opposite of retail investor beliefs, if we use fund flow data as a proxy for retail investors’ view on asset classes. (money has flowed out of U.S. equity funds and into bond funds over the last year based on Investment Company Institute data, a recent Citi chart shown below)
In terms of risk, 31% selected a ‘Double Dip’ as their largest concern. Inflation in developed markets such as the U.S. was chosen by just 17%, the lowest rated risk within the survery. Yet inflation in developing markets was a far larger concern — 30% are worried about ‘Emerging Market Inflation’ (ie., probably Chinese inflation). Only 22% listed Developed Market Deflation as their largest worry.
The most favoured stock market for 2010, as the potential ‘best performer’, is China (29%), followed by the U.S. (22%). Only 2% believe Europe will be #1.
We admit it, it’s worrying so many pros are loving stocks over government bonds these days, even if retail investors remain overwhelmingly bearish on stocks and long bonds. A true contrarian is piling into U.S. treasuries it seems, given that only 5% of pros chose it as their favourite asset class. Which means we’ll pass on being contrarian for now.
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(Via Goldman Sachs, Weekly Kickstart, 19 Feb 2010)