BENGALURU (Reuters) - Global funds in October recommended an increase in equity exposure in search of better returns at a time when stocks and bonds have rallied simultaneously on policy easing and monetary stimulus by major central banks, a Reuters poll found.
Following are a selection of comments provided by contributors to the latest Reuters global asset allocation poll, conducted on Oct. 8-29.
“Monetary easing in itself would not be sufficient to support equities, instead a collective push from fiscal policy would be required to create a positive environment for stock prices.”
CRAIG HOYDA, SENIOR QUANTITATIVE ANALYST, ABERDEEN STANDARD INVESTMENTS
“Mid single digits profits growth supports equities hence we are overweight. We remain underweight cash as there are better opportunities in risk assets with interest rates still extremely low.”
TREVOR GREETHAM, HEAD OF MULTI-ASSET, ROYAL LONDON ASSET MANAGEMENT
“We maintain a moderate overweight in stocks, as growth lead indicators show signs of troughing and central banks are cutting rates and printing money.
“We raised exposure to Europe and Japan as the relative earnings picture improved. We are most underweight the Asia Pacific region, where Hong Kong tensions have intensified and damaged regional earnings prospects.
“With global growth continuing to slow and inflation remaining low, global monetary easing can serve to prevent an economic downturn getting out of hand and restart global growth to prolong the business cycle. This should be positive for equity markets.
“Central banks globally have moved to ease policy and global growth is showing signs of picking up. This creates a supportive environment for global equities into 2020. We would be looking for opportunities to buy on dips, should we view the market as overly pessimistic.”
“Whilst corporate earnings have begun to suffer we still favor U.S. equities and for better value Japan, Asia and the emerging markets.
“Clearly, a positive result from the current trade talks is likely to benefit many of the global equity markets outside of those of the U.S. and China. Regions such as the emerging markets and Asia could be interesting for additional investment if we seen a trade agreement, lower interest rates, or a weaker U.S. dollar.
“Over the next six months risk assets could deliver further gains if we see a meaningful outcome to the trade talks, Brexit, and for central banks to remain loose. However, we could also see a correction given that equity markets have been very generous in recent times.”
“Defensives are extremely expensive should we approach a sustainable bottom - which is our base case. Therefore, we will likely reduce defensives over the next few months.”
“The U.S. reliance on global trade is lower than that of our trading partners, and that lower relative exposure has been a benefit to domestic markets.
“The preponderance of negative bond yields outside the U.S. along with the relatively stronger economy here at home makes us prefer domestic bonds.
“Monetary authorities are doing all they can to support economic growth, and this is appreciated by the equity markets. That said, the risks of a fiscal policy misstep are mounting, and that could overwhelm actions by central banks.
“Our asset allocation strategy will be driven most by developments in the U.S.-China trade war, but a Brexit deal or the emergence of German fiscal stimulus would also affect our investment allocation.”
Reporting by Shrutee Sarkar; Editing by David Holmes