US funds kept their model global portfolio mostly unchanged this month, still favoring stocks, on expectations of fiscal stimulus from President-elect Donald Trump in 2017 and a steeper pace of interest rate increases next year. US stocks have rallied since the November 8 presidential election, with the Dow Jones industrial average index up nearly 9 percent and closing at a record high 19,974.62 on Tuesday.
Recommended equity allocations remained more or less the same at 52.7 percent from 52.8 percent in November, with bonds slightly lower at 35.6 percent from 35.8 percent, the survey of 13 fund managers conducted from December 15 to 21 showed. In last month's poll, fund managers raised their equity allocations to a 16-month high amid a sell-off in bond markets after Trump's victory, on hopes that his infrastructure spending and tax cut plans would boost growth and inflation.
"We believe the economy and financial markets have weathered many challenges without substantive damage, and that the economic prospects and the profit picture look brighter," wrote Alan Gayle, director of asset allocation at RidgeWorth Investments in a note. "In this environment, we believe equity markets can continue their upward trend, though not without some setbacks, while bonds will remain vulnerable until a clearer sense of new policy direction and impact unfolds."
Meanwhile, US 10-year Treasury yields hit their highest in over two years last week after the Federal Reserve raised rates for the first time this year and signaled three more hikes in 2017. Markets and economists mostly expected only two increases next year. Recommended allocations to cash, property and alternative investments barely changed.
A regional breakdown showed allocations to North American stocks rose to 63.0 percent from 62.6 percent the previous month while they fell for British, euro zone and Japanese holdings.