Fixed income securities holdings fell by 80 basis points in November, according to State Street Holdings Indicators.
November results show that long-term investor allocations to equities have risen to 53.8%, the highest since early 2008. The figure also marks a full percentage point of growth over the month. At the same time, cash allocations fell by 20 basis points and fixed income securities holdings by 80 basis points.
Although long-term investment in sovereign fixed income markets has not been optimistic, Michael Metcalfe, head of macro strategy at State Street Global Markets, noted: “Demand for French sovereign bonds slumped to a six-month low in November, ahead of the subsequent collapse of the French government. For now, in a telling sign of the lack of contagion, investors remain overweight other high debt countries in the Euro area such as Italy.”
According to the State Street Risk Appetite Index, investor demand for risk has remained positive for the fourth consecutive month.
Equity investment is concentrated in the US, the indicators found, with Metcalfe observing that “while there are plenty of uncertainties about growth, policy and politics in the coming year, investor positions suggest their conviction in a US-led equity market rally is unflinching.
“By the end of November, holdings of US equities relative to the rest of the world were close to the most stretched in the twenty-six year history of State Street Global Markets’ data set. In short from the point of view of long-term investor holdings, the US has rarely been so exceptional.”
Looking globally, “in APAC, Japan remains the only area where investors are neutrally positioned, with significant underweights in emerging markets in particular. Long-term investor sentiment toward Chinese equities does at least remain constructive in response to, and in the hope for, further stimulus measures from the government.”
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