US funds turned in favour of stocks in November at the expense of cash, looking for better returns before the end of the year by lifting their recommended equity allocations to the highest since June, a Reuters poll of investment managers showed. That shift comes despite worries that an almost-daily-record-setting rally this year - driven by improving global economic conditions and optimism the US economy has gathered steam - has made shares look expensive on nearly any measure.
"With stocks hitting record highs, many investors want to avoid the largest source of risk in their portfolios - equities. But most assets are overvalued and we do need to find value before the year closes out," said a fund manager at a large US investment firm. "We also think equity markets can continue their upswing a bit more as prospects for the economy look better."
The latest recommendations for stock holdings marked a shift from the pattern seen in the past few months when funds had either cut or kept them steady. But it is still below the more common guidance of over 60 percent of the portfolio in the past. The small shift to equities also comes despite a lack of confidence that a tax-cutting bill will make it through the US Senate this year, a separate Reuters poll of economists earlier this month showed.
The Reuters survey of 13 fund managers, conducted Nov 13-29, showed equity allocations in a model global portfolio rose to 57.2 percent from 56.7 percent, the highest since the middle of the year. But the latest move up in stock allocations is modest given the roughly 17 percent rally in the Standard & Poor's 500 this year. Fund managers do not need to raise portfolio allocations to stocks in order to reap profits from them.
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