Fund managers add equities in October on Fed: Reuters poll

By Jennifer Ablan

NEW YORK (BestGrowthStock) – U.S. fund managers raised their exposure to equities in October and cut their high allocation to fixed-income assets on the likelihood of further easing by the Federal Reserve, a Reuters poll showed on Thursday.

Based on 14 U.S.-based fund management firms, surveyed October 14-27, firms raised equity holdings for a second consecutive month, to an average 62.4 percent of their assets, compared with 61.7 percent in September and 61.5 percent in August.

While U.S. stock markets have been supported by solid corporate earnings, the likelihood of more monetary stimulus from the U.S. central bank has provided an enormous boost.

“Stocks have been rising in response to the prospect of additional monetary stimulus, not because of any evidence of economic improvement,” David Joy, chief market strategist at Columbia Management, told Reuters on Thursday. “Stocks have benefited because another round of quantitative easing will presumably assist the recovery.”

The Fed is expected to announce another round of asset purchases when it holds its next policy meeting on November 2-3, after already spending $1.7 trillion on securities purchases to pull the economy out of the financial crisis.

The prospect of more market intervention by the Fed is again pushing U.S. bond yields lower, reducing the cost of borrowing dollars and encouraging investors to use those funds to buy assets such as stocks and commodities.

Indeed, September’s rally drew money managers back into the market, as many had been reluctant to make huge bets in equities after an awful August. After climbing 7.7 percent in September, the Dow Jones industrial average (.DJI: ) has gained 3.1 percent so far this month. The Standard & Poor’s 500 index (.SPX: ) is up 3.6 percent so far in October, following a gain of 8.8 percent in September.

Exposure to fixed-income securities, including government and investment-grade and high-yield “junk” bonds, dropped for a second consecutive month to 30.4 percent in October from 31.1 percent in September, the Reuters poll showed.

Money managers are not entirely letting their guards down, however. Cash allocations remained 3.3 percent in October, the same as the previous month.

(Polling by Bangalore Polling Unit; Editing by Padraic Cassidy)

Fund managers add equities in October on Fed: Reuters poll