Despite the sharp rally in most equity markets across the globe since their respective March 2020 low, most fund managers still remain bullish on the road ahead for this asset class. Though they do caution against the intermittent corrections, the overall bullish trend, they say, remains intact for now.
A BofA September Global Fund Manager Survey for September suggests that 58 per cent of those surveyed say the market is in a bull-phase – up from 25 per cent who believed so in May.
224 panelists with $646 billion worth of assets under management (AUM) participated in the survey conducted between September 3 and September 10. 199 participants with $601 billion AUM responded to the Global FMS questions and 90 participants with $181 billion AUM responded to the Regional FMS questions, BofA Securities said.
However, the sustainability of this recovery has led to a marginal rise in cash levels across fund managers surveyed - from 4.6 per cent earlier to 4.8 per cent in September. Preference to US equities, according to BofA Securities, continued in September as well across most global fund managers over Europe, UK, and emerging markets (EMs). As a result, US tech stocks remained the most crowded trade.
Those at Credit Suisse Wealth Management, too, echo a similar view. Though they expect the equities to do well on the back of accommodative central bank policies, especially the US Federal Reserve (US Fed), they do caution against the lopsided valuation of US tech stocks.
“The recent correction in the US Equities, they caution, is a warning shot that a more pronounced consolidation could be in the offing after equity valuations became lofty over the past few months, with the US markets, in particular, becoming increasingly lopsided as the rally was concentrated in certain technology names,” wrote Jitendra Gohil, head of India equity research at Credit Suisse Wealth Management in a September 15 co-authored note with Premal Kamdar.
As regards India, Credit Suisse Wealth Management expects the equity market to see some downward pressure in the coming weeks as profit booking may set in.
“However, from a medium-term perspective, we still expect positive returns from equities as we believe equity as an asset class should see support from ultra-loose monetary policies by the major central banks. We recommend investors to use this weakness to build exposure to large private sector banks from a 12-18 months’ perspective,” they said.
According to Goldman Sachs, markets currently are in the first phase of a new investment cycle, which it calls a ‘Hope’ rally. Investors, it says, start to anticipate an economic recovery in this phase and is typically the strongest part of the cycle. The liquidity support from global central banks that has fueled this rally is likely to continue and the 'policy support' remains very supportive for risk assets, Goldman Sachs believes. Economic recovery, they believe, looks more durable as vaccines become more likely. On the other hand, 49 per cent of fund managers surveyed by BofA Securities in September said that the global economy was in the early-cycle phase versus 37 per cent who still believe that it is still in a recession.
“September FMS shows net 61 per cent of investors predict a U- or W-shape recovery vs 20 per cent saying V-shape,” BofA Securities said.
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