By Brett Arends
Don’t you wish your 401(k) was being run by the same highly-paid geniuses who manage big institutional pension funds?
Early last year, when stock markets collapsed and stocks everywhere were fire-sale cheap, the big money crowd slashed their clients’ exposure to stocks to near-record lows.
After all, who wants to own risky stocks when the prices are low?
Today, with stock market indexes through the roof, the same institutional managers have their clients’ money back into stocks, big time.
“Investors continued to get more risk-on with the net OW (“overweight”) to equities up slightly to close to all-time highs of 62%,” reports the latest Bank of America global fund manager survey.
A net 21% tell Bank of America “they are currently taking higher-than-normal risk levels” in their portfolios. (Ahem. “ Higher than normal? ” What? The survey data show that their risk positions are near the highest levels seen in 20 years’ of surveys.)
In other words: Sell low, buy high! Genius! What could go wrong?
The bank’s investment management arm surveyed more than 200 top money managers around the world, in aggregate managing more than $600 billion in assets.
In May of last year just 10% of big money managers predicted a fast, “V” shaped recovery. Today, after the national unemployment rate has collapsed, that’s risen to 50%. If only us poor saps trying to manage our portfolios on our own, without the benefit of high-powered economic forecasting departments, had access to this kind of brilliance!
A year ago, the big money managers also said that large-company stocks would be a much better investment than small-company stocks.
In the past 12 months the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.49% of large-company stocks has underperformed the Russell 2000 index /zigman2/quotes/210598147/delayed RUT +2.47% of small-caps by… er… 40 percentage points.
Granted, these people aren’t always wrong about everything. On the other hand, no regular Joe or Jane really needs to envy them their insights. The average big money manager is more concerned about not getting fired or not getting sued. Instead of “MBA” or “CFA” after their names, a lot of these people should have the letters “CYA.”
Among their latest prognostications, money managers now tell Bank of America they’re expecting higher inflation and higher interest rates ahead. But they’re still bullish. Just 7% think U.S. stocks are in a “bubble.” More of them are bullish on bitcoin this year than on long-term Treasury bonds.
Their favorite stock market sectors include banks, industrial stocks and “consumer discretionary” companies.
Their least favorite are those defensive sectors, utilities and consumer staples.
They are more bullish on U.S. stocks this year than they are on other major assets like bonds, gold or emerging market stocks. Their least favorite stock markets world-wide are London and Tokyo.
Meanwhile, they now predict that small-cap stocks will beat large companies for the next 12 months.
If this makes you want to own UK stocks /zigman2/quotes/201753704/composite FLGB +1.46% Japanese stocks /zigman2/quotes/203244118/composite FLJP +1.47% , cash and bonds, and run from small-company stocks, you’re probably not alone.
Either way, if you feel these guys have some kind of secret edge, you can rest easy.