NEW YORK (Reuters) - U.S. investors increased their exposure to equities in January to the highest level in nine months, a Reuters poll showed on Thursday, reflecting a shift in sentiment that has helped push the Standard & Poor’s 500 index to a five-year high.
Money managers raised the allocation of stocks in their global portfolios to an average 64.7 percent in January, the highest weighting since April.
The broad push back into stocks in January came after a last-minute compromise in Washington that averted a so-called “fiscal cliff” and put off decisions on government spending cuts and income tax hikes until later.
Concerns about the impact of the fiscal cliff had prompted U.S. investors in December to cut their equity exposure to 59.1 percent of their assets, the lowest equity weighting since at least the financial crisis.
Solid corporate earnings, seasonal inflows into the stock market and signs of an improving global growth picture also supported equities in January. Those factors helped drive the benchmark S&P 500 index to its highest levels in five years and saw it ratchet up an eight-day rally through January 25, its longest winning streak in eight years.
Several strategists have noted that 2013 could mark a so-called “Great Rotation” out of low-yielding fixed income securities and into stocks.
The average bond weighting in U.S. investors’ portfolios fell to 30.4 percent in January, its lowest level since October, the poll showed. Average cash levels dropped to 1.9 percent, the lowest level since April 2012.
But not everyone is convinced by the latest bull run that kicked off at the start of the year. Investors pulled $42.7 billion out of equity funds in the last three months of 2012, according to Lipper data.
“I am concerned that the impact from the recently enacted tax increases in the U.S. may not have been fully incorporated into sales and earnings projections, suggesting only cautious optimism,” said Alan Gayle, chief strategist at Ridgeworth Investments.
The poll of 10 U.S. investment firms was conducted between January 16 and 29, before data showed the U.S. economy unexpectedly contracted in the final quarter of last year.
U.S. investors ramped up their exposure to euro zone stocks in January to 12.5 percent of their stock portfolios, from 10 percent in December, according to the poll, as concerns about the euro zone debt crisis eased.
They also slightly increased their holdings of U.S. and Canadian equities to 65.5 percent of stock portfolios compared to 65.3 percent in December.
The average weighting of Japanese shares in investors’ stock portfolios fell to 5.7 percent from 6.2 percent in December.
Polling by Sarmista Sen and Namrata Anchan; Editing by Susan Fenton