September 30, 2013 / 11:13 AM / 6 years ago

Investors cut U.S. stocks, bonds on policy uncertainty

LONDON (Reuters) - Global investors cut allocation to U.S. equities and bonds this month as uncertainty about U.S. monetary and fiscal policies grew, a Reuters poll showed on Monday.

September’s global asset allocation poll also showed investors boosted euro zone equities for a third month in a row to levels not seen since March 2012, thanks to a brighter economic outlook in the region.

The poll was conducted September 13-26. That was either side of the Federal Reserve’s surprise decision to keep its monetary stimulus intact this month but before weekend events in Rome and Washington intensified fears of a U.S. government shutdown and the collapse of Italy’s coalition government.

Some 54 investors from the United States, Europe and Japan cut allocation to U.S. stocks to a four-month low of 41.7 percent, from 42.9 percent in August. Bond weighting in the region fell to 37.5 percent, a level not seen since December.

World stocks received a brief boost from the Fed’s September 18 announcement that it would keep the size of its monthly bond-buying unchanged. But the support faded as uncertainty grew over when the U.S. central bank will start withdrawing its hefty monetary stimulus, and by how much.

Coupled with concerns over U.S. budget talks, investors largely adopted a wait-and-see stance.

“Most firms are coming to the question of how much upside is there left in the near-term and whether it is worth the risk to invest here,” said Douglas Gordon, senior investment strategist at Seattle-based Russell Investments. “Everyone is waiting to hear more from the Fed about its plans.”

Investors had 36.6 percent of their global balanced portfolios in bonds in September, largely unchanged from August’s 36.5 percent. Equity allocation remained steady at 50.7 percent and cash dipped to 5.9 percent.

Investors cut equity holdings in emerging Europe to 1.6 percent, the lowest since November. The region’s economies are suffering from slowing growth, while capital flows out of developing markets have left many of them at risk of balance of payments problems.

The bright spot was euro zone equities, where investors increased their allocations for a fourth straight month to 17.3 percent, the highest reading since March 2012.

“(The Fed) decision has added uncertainty and probably more volatility for the last quarter. There will be a tapering but we do not know when and (by) which amount. Discussions around debt ceiling will also add volatility in that context,” said Nadege Dufosse, cross asset strategist at Dexia Asset Management.

“This should give us opportunities to reinforce our exposure to equity markets.”


The threat of a government shutdown kept U.S. investors defensive, with investors reducing equity holdings <US/ASSET> to 56.1 percent - the lowest since at least April 2007.

Japanese fund managers raised equity allocation in Asia and the United States and cut overall bond weighting to a 16-month low. Average equity holdings hit a 16-month high of 44.0 percent and Asian weighting increased to 7.4 percent <JP/ASSET>.

European fund managers <EUR/ASSET> pulled money from emerging Asian and U.S. stocks and boosted equity holdings at home where growth momentum is accelerating. Overall equity allocation rose for a third month in a row, to 47.5 percent on average.

British investors <GB/ASSET> had an average 14.7 percent of their global equity portfolios invested in the euro zone this month, and some 18.1 percent of global bond portfolios - levels not seen since 2011.

Additional reporting by Tom Bill in London, Pia Quaglia Regondi in Milan, Sarmista Sen and Rahul Karunakar in Bangalore and Ayai Tomisawa in Tokyo; Editing by Catherine Evans

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