LONDON Equity investors have been behaving like sprinters rather than middle-distance runners when it comes to developed markets this year, threatening in many cases to reach year-end targets for gains months in advance.
It suggests they are either in for a bumper year or heading for a bumpy ride. It also makes markets particularly susceptible to short sell-offs triggered by anything from food inflation scares to Egypt unrest to suddenly disappointing earnings.
At the end of last year, consensus predictions were for equities to make steady gains but not to rack up the kinds of massive rises seen in 2009. High single-digit to low double-digit gains were expected for major developed markets.
Roughly six weeks into 2011, some are already there even after this week's wobbles.
Consider, for example, the S&P 500 .SPX. The Reuters poll in December showed equity strategists expecting the broad index of U.S. stocks to gain 5.36 percent.
As of Thursday's close, it had already captured 95 percent of that.
Other developed indexes tell the same story. France's CAC .FCHI has 73 percent of its expected annual gain; Germany's DAX .GDAXI 60 percent and Britain's FTSE .FTSE 30 percent.
Even Japan's Nikkei .N225, set with a poll target of 17.31 percent, is already 21 percent of the way to the goal.
Italy's MIB .FTMIB, meanwhile, has managed the impressive achievement of gaining more than 12 percent, 133 percent of what strategists thought it could manage for the whole year.
All this, remember, before the middle of February.
Globally, MSCI's developed world stock index .MIWO00000PUS is up 4.3 percent for the year.
If that kept up, it would be a compounded gain of around 45 percent for the year, easily the largest annual gain in the index's 23 year history.
TIME TO REASSESS
This market behaviour means one of two things is likely to happen -- either the strategists' projections are spectacularly wrong and a record-breaking year is in the making, or some form of correction, at least in pace, is ahead.
From the standpoint of investor positioning, there is scant evidence to suggest investors are getting overly nervous.
Reuters asset allocation polls at the end of January showed solid overweights in equities and exposure growing. Fund tracker EPFR Global's latest report, meanwhile, showed developed market funds taking in money for the seventh week in the past eight.
Some investors, indeed, are sounding increasingly bullish.
Joachim Faber, chief executive officer of the giant Allianz Global Investors, told Reuters this week that there were "extraordinarily good conditions" on European share markets.
"We have an interest rate that is clearly below what is justified by the quality of developments at companies. Interest rates can't be higher because of Ireland, Greece, Portugal and so forth." he said
"Secondly, the world economy is giving a lot of support to exports, so we've got a tailwind. So, I think it will be a good year."
MSCI's euro zone stock index .MIEM00000PEU is up nearly 7 percent for 2011, close to eclipsing some annual projections.
It has all but met Generali Investments' in-house projection for the year, for example. So what does an investors do?
Klaus Wiener, Generali's head of research, said it scrutinises what has happened, taking into account the gains to set new targets.
"Given what we have seen over the past few months it needs to be reassessed," Wiener said. "Equities will probably (be) better than forecast."
But he added that the pace of gains has been such that his firm may take a bit of risk out of their portfolios this month.
It is when that happens that markets start to wobble and the recent three-day falls in global stocks may reflect investors taking advantage of negative events to lock in some of the year's gains.
Egypt, for example, has had some impact, mainly by pushing up the price of oil and feeding a growing unease about inflation and possible future monetary tightening.
More unnerving for some stock investors has been the sudden appearance of disappointing corporate earnings reports, mainly in Europe but also on Wall Street.
That kind of thing undermines one of the biggest drivers behind the developed market equity rally.
The performance of emerging market stocks, in the meantime, has been the flip side of developed, with barely any progress towards analysts' targets and losses in some cases.
Some firms, such as Goldman Sachs, expect fund flows to turn back to emerging markets later in the year.
In that sense, the developed market race could well turn from sprint to hurdle.
(Additional reporting by Jonathan Gould; Editing by Toby Chopra)