Tag Archives: Great Rotation

Business, Finance, Occupation & Industry

Investors Still Like Bonds, Even as Stock Market Surges

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By The Associated Press

dow jones stocks rally bonds

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Richard Drew/AP

By MARK JEWELL and MATTHEW CRAFT

Market pros call it the Great Rotation. That’s the long-awaited scenario when investors take their money out of bonds and sink it into stocks.

It was the buzzword this month when the Dow Jones industrial average (^DJI) reached a record high. The idea was that investors were confident enough in the economy to shed their financial crisis fears and leave the safety of bonds.

But it’s not happening.

Money keeps flowing into bonds. Industry consultant Strategic Insight says U.S. bond mutual funds have attracted $64 billion in cash in the first two months of the year, just below last year’s pace of $68 billion over the same period.

Stock mutual funds had net deposits of $76 billion through February, according to the consultancy. While that is up sharply from $14 billion a year earlier, the cash for stocks is not coming at the expense of bonds, according to more recent snapshots of investment flows.

Instead, investors are withdrawing from money-market funds, which are often used as a parking spot for cash, according to EPFR Global.

“The expectations of a big exodus from bonds are way overblown,” says David Santschi, CEO of TrimTabs Investment Research, a fund-tracking firm.

A stock market crash and recession have made bonds especially appealing since 2008, when the nation was in the throes of the financial crisis. The abundance of buyers has pushed bond prices up and sent yields lower, reducing interest payments to investors.

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Even with low yields, bonds will continue to attract retiring baby boomers and others who want reliable income for daily expenses. The yield on the 10-year Treasury note — a benchmark — is hovering under 2 percent. Other types offer higher yields. Investment-grade corporate bonds yield 3 percent and riskier “junk” bonds yield just under 6 percent.

Money-market funds, meanwhile, yield 0.02 percent.

Still, the Dow’s record surge is drawing more attention to stocks.

The blue-chip index broke through its all-time high March 5 and kept climbing. It’s up nearly 11 percent this year and 122 percent from its bottom in March 2009. The broader Standard & Poor’s 500 index (^GSPC) is up 9 percent and is close to breaking its own record.

Investors added $8 billion to U.S. stock funds and exchange-traded funds in February. And they’re putting in more cash this month, as $12 billion flowed into stock funds and ETFs through Tuesday, according to EPFR Global.

Bond funds, including ETFs, have pulled in nearly $8 billion this month.

Much of the money flowing into stocks and bonds has come out of money-market funds. About $32 billion has been pulled out of money funds this month, according to EPFR Global.

Withdrawals that didn’t …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Despite Stock Surge, Money Still Flowing Into Bonds

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By The Associated Press

Filed under: , , ,

Market pros call it the Great Rotation. That’s the long-awaited scenario when investors take their money out of bonds and sink it into stocks.

It was the buzzword this month when the Dow Jones industrial average reached a record high. The idea was that investors were confident enough in the economy to shed their financial crisis fears and leave the safety of bonds.

But it’s not happening.

Money keeps flowing into bonds. Industry consultant Strategic Insight says U.S. bond mutual funds have attracted $64 billion in cash in the first two months of the year, just below last year’s pace of $68 billion over the same period.

Stock mutual funds had net deposits of $76 billion through February, according to the consultancy. While that is up sharply from $14 billion a year earlier, the cash for stocks is not coming at the expense of bonds, according to more recent snapshots of investment flows.

Instead, investors are withdrawing from money-market funds, which are often used as a parking spot for cash, according to EPFR Global.

“The expectations of a big exodus from bonds are way overblown,” says David Santschi, CEO of TrimTabs Investment Research, a fund-tracking firm.

A stock market crash and recession have made bonds especially appealing since 2008, when the nation was in the throes of the financial crisis. The abundance of buyers has pushed bond prices up and sent yields lower, reducing interest payments to investors.

Even with low yields, bonds will continue to attract retiring baby boomers and others who want reliable income for daily expenses. The yield on the 10-year Treasury note – a benchmark – is hovering under 2 percent. Other types offer higher yields. Investment-grade corporate bonds yield 3 percent and riskier “junk” bonds yield just under 6 percent.

Money-market funds, meanwhile, yield 0.02 percent.

Still, the Dow’s record surge is drawing more attention to stocks.

The blue-chip index broke through its all-time high March 5 and kept climbing. It’s up nearly 11 percent this year and 122 percent from its bottom in March 2009. The broader Standard & Poor’s 500 index is up 9 percent and is close to breaking its own record.

Investors added $8 billion to U.S. stock funds and exchange-traded funds in February. And they’re putting in more cash this month, as $12 billion flowed into stock funds and ETFs through Tuesday, according to EPFR Global.

Bond funds, including ETFs, have pulled in nearly $8 billion this month.

Much of the money flowing into stocks and bonds has come out of money-market funds. About $32 billion has been pulled out of money funds this month, according to EPFR Global.

Withdrawals that didn’t go directly into stock or bond mutual funds could have gone into bank accounts, covered daily expenses or been used for other needs. Investors also …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

BofA Merrill Lynch Fund Manager Survey Finds Investors Increasingly Confident in U.S. Outlook

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By Business Wirevia The Motley Fool

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BofA Merrill Lynch Fund Manager Survey Finds Investors Increasingly Confident in U.S. Outlook

Appetite for Equities Remains High Despite China Concerns

NEW YORK–(BUSINESS WIRE)– Increasing confidence in the outlook for the U.S. dollar and U.S. equities is offsetting investors’ renewed concerns over China, according to the BofA Merrill Lynch Fund Manager Survey for March.

This month registered the highest level of dollar bullishness in the survey’s history. A net 72 percent of respondents now expect the U.S. currency to appreciate over the next year, a 30-point increase in a month. Bearishness on U.S. stocks has also reversed. A net 5 percent identify the U.S. as the regional market it most wishes to overweight, compared to January’s net 19 percent underweight. The U.S. also offers the best outlook of any region for corporate profits by far, investors believe.

Against this background, investors remain positive on the global economy’s recovery and continue to increase exposure to equity markets. A net 61 percent expects macroeconomic performance around the world to strengthen over the next year, a slight increase on last month’s reading. A net 57 percent of asset allocators are now overweight equities, up from a net 51 percent in the two previous months.

This positive stance offsets a gloomier view of China. Only a net 14 percent of regional investors now expect the Chinese economy to be stronger in a year’s time. This represents one of the sharpest falls in this reading in the survey’s history. Significantly increased fears of a hard landing in China are reflected in a shift out of emerging market equities and into developed markets (mainly the U.S. and Japan).

“Relative U.S. economic outperformance on the back of the housing market‘s ongoing improvement and the energy independence story will lead a secular uptrend in the dollar. U.S. equities’ leadership in the ‘Great Rotation‘ suggests developed market equities are the likeliest winner in this scenario,” Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, said. “A disconnect between European investors’ increasing optimism about the region and global investors’ continued caution over Europe is also apparent in the survey,” added John Bilton, European investment strategist.

European enthusiasm emerges

European fund managers have adopted a much more positive outlook for the region’s economy. A net 40 percent now expects it to strengthen …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Stocks Going Higher? 3 Myths (And The Truth)!

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By Rob Clarfeld, Contributor It seems to me that we have entered a time where facts about the market and the economy are thrown aside in favor of narratives that are appealing to the average investor.  During the past few weeks, prominent publications have run with headlines espousing how the “Great Rotation” into stocks from bonds and the “strong economy” are the causes of the great performance run that stocks have had to start the year.  If only it were true… 
Source: FULL ARTICLE at Forbes Latest