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Zacks #1 Stocks on the Move 06/19/2013

Company Name Symbol %Change
SUPPORTCOM I SPRT
4.19%
SONIC FOUNDR SOFO
4.10%
SUMITOMO MIT SMFG
3.61%
HOOKER FURNI HOFT
3.31%
INGLES MARKE IMKTA
3.05%
Neena Mishra

Has the Great Rotation Started?

by Neena Mishra

March 07, 2013 | Comments : 10 Recommended this article: (0)

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After thirty years of bull market in bonds, it appears that investors are finally getting ready to get out of bonds and into equities.

Strong inflows in equities and equity funds have been a result of the improving economy and an impressive performance by the equity markets, as also increasing worries that the Fed may finally slow down the bond purchases in near future and the interest rates may start creeping up.

Global inflows into equity ETFs were up 59.7% to $46 billion in the first two months of this year while inflows into fixed income ETFs were down 79.7% to just $2.8 billion.

Treasury bonds currently offer very low or negative yields in real terms. In comparison with the bonds, stocks still look attractively priced (see the following equity risk premium chart) and they also pay higher yields.

Wealth managers now recommend 48% allocation to stocks, up from 45% and 29% in bonds, down from 34%, a year ago.

It is apparent that interest rates will go up from here, even though we still do not know when.

So the bond party may finally be coming to an end and the bonds look extremely risky as an asset class at present.

Do you think that the “great rotation” has started? And will it provide further momentum to the stock market rally?

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