Seeing Rally As Fragile, Some Funds Back Away As U.S. Stocks Near Record

Ted

FYI: The rally that has sent the benchmark S&P 500 up more than 15 percent from its February low is prompting U.S. diversified funds to sell shares as the market nears its record high.

The average asset allocation fund - so called because the funds can invest in anything from stocks to bonds and currencies - has 40.2 percent of its portfolio in U.S. equities, down 1.2 percentage points from six months ago, according to Lipper, a Thomson Reuters company.

The average weighting to U.S. stocks is nearly 2 percentage points less than it was at when stocks last reached record high in May 2015, suggesting that fund managers are less bullish now
Regards,
Ted
http://www.reuters.com/article/usa-stocks-rally-idUSL2N17N0UL

BobC

1-2 percentage points less in U.S. stocks is next to nothing, especially considering most of this group has looked pretty weak anyway.

Old_Skeet

In checking several of my moderate allocation fund's asset allocations I have noticed a reduction in their exposure to equities. One fund that I monitor closely is American Balanced Fund (ABALX). Not to long ago an Instant Xray analysis of this fund reflected about a 70% exposure to equities and now it has positioned equities back to the mid 50% range. Another fund that I also monitor is Columbia Thermostat (CTFAX). Back in February it had ramped up it's equity allocation up to about 40% and now it has reduced it to about 20% based upon recent valuation of the S&P 500 Index. When equity prices are low it ramps up its allocaton and when valuations are high it reduces its exposure to equities.

This is one of the reasons that about 40% of my overall portfolio is invested in hybrid type funds where the fund managers throttle their allocations based upon how they are reading the markets. I myself have scaled back my equity allocation, in the part of the portfolio I govern, due to a relative high valuation now found on the S&P 500 Index's reported price to earnings ratio which as last friday had a reading of 24.2 according to the WSJ. This indicates, to me, stocks are currently richly priced according to the Rule of Twenty.

I know I have been reducing my exposure to equities over the past thirty days, or so, and might even reduce it further. According to my asset allocation matrix my exporsure to equities ranges from a low of about 45% to a high of 55%. Currently, my equity allocation bubbles at about 50% and will most likely be moved towards the 45% mark as summer approaches (booking profits) and raising cash by a like amount during this process.

Remember, stocks usually go soft during the summer months and we have an upcoming Presidential election and its associated campaign. I am thinking this is going to have a great influence on stock market prices.