What the big money is betting on in 2014
Arends: Wall Streeters are bullish on market — how to bet against them
What does 2014 hold for financial markets? The world’s biggest money managers are making some bold bets for the New Year, according to a new survey.
The big-money crowd is gambling that stock markets will keep soaring in 2014, that the U.S. dollar will rise, and that bonds, commodities and gold will continue to slump, according to the latest survey by Bank of America Merrill Lynch, which conducts perhaps the most authoritative survey of world money managers.
A net 54% of these asset managers remain “overweight” stocks in their portfolios, as they bet that markets will keep booming even following a thumping performance this year.
Meanwhile, a remarkable 64% remain underweight bonds, despite this year’s sharp fall in prices and rise in yields, which ought to make bonds more attractive. Fears predominate that as the global economy continues to recover from the long economic slump and central banks scale back their support for the bond market, long-term interest rates will rise further and bond prices will fall.
A net 31% also enter 2014 underweight commodities, one of the most bearish readings on the asset class that the survey has found since it began asking about the asset class in 2006.
Money managers also remain bearish about gold, even though it has tumbled sharply in price this year, which ought, again, to make it relatively more attractive. On the contrary, the overwhelming majority of money managers told the survey that they believe the U.S. dollar is undervalued.
The survey gets even more interesting when you get down into the details. Money managers are huge bulls on technology stocks, despite a huge rally this year which has lifted the Nasdaq Composite about a third, breaking 4,000 for the first time since the dotcom crash early last decade.
“Global Tech is the most popular sector among investors by far,” reports Bank of America Merrill Lynch, adding that among those polled, a net 48% were overweight technology stocks in their portfolios. It is the second-highest reading in nearly a decade’s data.
Money managers are also betting that bank stocks will continue to rally as the global economy gets stronger.
Among the regions, money managers are huge bulls on Japan, where the net overweight is at near-record levels, and strongly bullish of U.S. and European stock markets as well. On the other hand, they are bearish about emerging markets, with a net 10% underweight the region. Brazilian stocks are especially unpopular, according to the survey.
Maybe I am excessively cynical, but the most interesting aspect of these surveys is how often money managers, in aggregate, turn out to be wrong. It’s not always the case, but it frequently is: The assets they hate the most often turn out to do the best, and those they like the most often turn out to do badly. http://www.marketwatch.com/story/what-the-big...2013-12-18
