Investors are less worried about an equities market meltdown in 2018
Global investors are less worried about stock markets peaking in 2018, according to a new survey, as the consensus expectation for when prices will begin to decline has slipped from the second quarter of 2018 to 2019 or beyond.
The number of investors taking out protection against a near-term correction in the markets, meanwhile, has fallen to the lowest level since 2013, according to Bank of America Merrill Lynch (BoAML)'s closely watched monthly survey.
But although 30 per cent of investors predicted the peak to hit in 2019 or beyond, the remaining 70 per cent still think it could occur at some point this year.
Equities became the asset of choice for investors in January, as allocation to stocks globally hit a two-year high and bonds fell to a four-year low. BoAML researchers attributed the shift to "bond paranoia".
“Investors continue to favour equities,” said Michael Hartnett, chief investment strategist at the bank. “By the end of the first quarter, we expect peak positioning to combine with peak profits and policy to create a spike in volatility.”
As investors piled into stocks, cyclical plays such as tech, industrials and emerging markets took the limelight from defensive sectors such as telecoms, utilities and the UK.
In fact, the popularity of the UK as a region sank to the lowest since 2001 as Brexit continues to play on investors' minds.
Fears names by investors included inflation and/or a crash in global bond markets, followed by a policy mistake from the European Central Bank or the US Federal Reserve and market structure.
The jump in the popularity of equities comes as Jeremy Grantham, founder of asset management firm GMO, earlier this month warned that stock markets were headed for an imminent "melt-up" which would precede a crash.