By Tushar Goenka and Hari Kishan
BENGALURU (Reuters) – Global funds recommended cutting equity allocations to the lowest since early 2010 and increasing bond holdings to their highest since then, according to a September Reuters poll which found a correction in world stocks before year-end was likely.
Volatility in equity markets resurged this month ahead of the November U.S. election and as the death toll from COVID-19 rose past 1 million – a bleak statistic in a pandemic that has devastated the global economy.
(Reuters interactive graphic: https://tmsnrt.rs/2VqS5PS)
While U.S. stocks are set for their first monthly decline since March, the S&P 500 and Nasdaq are still on course for their best two-quarter winning streak since 2009 and 2000, respectively.
The Reuters Sept. 15-29 poll of 35 wealth managers and chief investment officers in the United States, Europe and Japan showed a cut in equity allocations to an average 42.7% of the model global portfolio, down from 43.1% in August.
At the start of the year, recommended global equity allocations were at an average 49.7%, the highest in nearly two years but have been cut gradually since. September’s was the lowest since comparable polling began in early 2010.
“The market remains at risk of a deeper correction, both because of the several macro and geopolitical risks – COVID-19, U.S. election, U.S.-China frictions – and the fragile structure of the market itself,” noted the investment team at Generali Investments Partners.
Over 70% of 21 funds who provided a view said a correction in world stock markets by end-year was likely.
“We are entering the autumn months which historically has been a period that can be gratifying or disagreeable with investors,” said Peter Lowman, chief investment officer at Investment Quorum in London.
“This year we have to contend with the possibility the