Despite the sudden outbreak of uncertainties, investors have maintained their preference for equities and stock-related ETFs.
According to a Reuters, global funds increased allocations to stocks to a two-year high at the expense of bonds and cash holdings in their model global portfolio recommendations this month.
“We should consider that we are in a late (economic) cycle, and most of the cyclical acceleration in 2020 is expected in the first half. Therefore, we expect to reduce risk exposure at some point between Q2 and Q3,” Pascal Blanqué, chief investment officer at Europe’s largest asset manager, Amundi, told Reuters.
Equities remained the preferred choice for investors even as the markets grappled with the threat of a war in the Middle East and now a spreading coronavirus in China that led to more than 200 deaths, multiple travel bans, flight cancellations and factory shutdowns.
“While we acknowledge the increased risks represented by the coronavirus and rising Middle East tensions, the global economic landscape is notably more positive entering 2020,” Alan Gayle, president at Via Nova Investment Management, told Reuters. “Moreover, earnings prospects are improving and central bankers intend to keep interest rates low, which supports a higher stock market. We plan to maintain our increased equity exposure at least over the near term.”
The Reuters poll of asset managers revealed global investors were in search of better returns and increased their exposure to equities to the highest level since January 2018, an average 49.7% from 47.0% in December.
“Equities look most attractive from a cross-asset point of view and remain one of the highest-yielding assets,” Benjamin Seuss, director at UBS Asset Management, told Reuters.
ETF investors have also maintained heavy demand for stock ETFs through the year. Among the most popular ETF plays year-to-date, Vanguard Total Stock Market ETF (NYSEArca: VTI) brought in $2.6 billion in inflows, iShares Core S&P 500 ETF (NYSEArca: IVV) saw $2.1 billion in inflows, iShares Core MSCI EAFE ETF (IEFA) attracted $2.0 billion, Vanguard S&P 500 ETF (NYSEARCA: VOO) added $2.0 billion and iShares MSCI USA ESG Optimized ETF (NasdaqGM: ESGU) experienced $1.9 billion in inflows.
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