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Among US stocks, technology stocks appear to be on the rebound. (Image: REUTERS)
A growing number of global fund managers believe the S&P 500 will outperform in 2021, according to Bank of America’s Global Fund Manager Survey (FMS). Today, 34% of survey respondents believe the S&P 500 may be the best investment for 2021, dethroning emerging markets which were the most favored trade until last month. So far this year, the S&P 500 has jumped 12.5% while emerging markets such as India and Brazil have been broadly flat since the start of the year.
In the latest BofA FMS, aside from the S&P 500 and emerging markets, investors believe oil is the third best-positioned asset to outperform in 2021. However, optimism about oil seems to fade as only 14 % of investors believe commodities to be the best asset of the year, down 11% since the last survey. Next come Bitcoin, gold and 3-month treasury bills. Conviction for US stocks is generally on the rise, according to the FMS. Meanwhile, optimism for emerging markets has waned.
Among US stocks, technology stocks appear to be on the rebound. The “cyclical rotation” of the FMS continued in April, but investors also returned to the preferred technology trade. Banks have now moved into the “growing optimism” quadrant while technology has become less pessimistic, ”according to the BofA survey. Fund managers still say long technology is once again the most congested trade.
However, in the debate over large caps versus small caps, 24% of FMS participants continue to believe that small cap stocks could have an edge over large caps over the next 12 months. Meanwhile, a record 53% of FMS investors believe value trading will outperform growth over the next year.
In terms of risk to future investors, the pandemic has once again taken a step back. Investors see the bond crisis and inflation as the biggest concerns surrounding the market. It’s for the second month in a row that investors haven’t listed the covid-19 pandemic as their biggest worry. But, FMS doesn’t think rates at 1.5% would cause stocks to correct. “On average, FMS investors believe the 10-year Treasury yield at 2.3% makes bonds attractive relative to stocks,” they said. Investors are watching for returns from 1.5% to 2%, as 47% of investors believe 2% is the calculation level of the 10-year Treasury that will cause stocks to correct 10%.
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