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Investment News and Trends

Merrill Survey: Investors Find Safe Haven in Emerging Markets

During the recent market upheaval, investors were turning away from U.S. and U.K stocks and toward emerging markets and eurozone equity markets, according to the Merrill Lynch Survey of Fund Managers. A net 36% of allocators are overweight emerging market equities...a net 37% are overweight eurozone equities," notes the survey. Investors are less enthusiastic about prospects in Japan because of the stronger yen and economic uncertainties.

Despite the recent market turmoil in the U.S, investors continue to prefer stocks to bonds. "Investors say they are worried about business cycle risk, but asset allocators have yet to start reshaping their portfolios for a different environment," says David Bowers, consultant to Merrill Lynch.

Another point to note: Investors feel that equities are undervalued, with some considering buying opportunities in the coming months. In fact 37% of asset allocators indicated they would increase their equities exposure - that’s up 8 percentage points from August numbers.
(www.ml.com)

Painful Months: UBS Says Investors Are Not Happy

A UBS/Gallup Index of Investor Optimism is showing that investors don’t have much to be optimistic about. The Index dipped another 5 points recently, the fourth consecutive month of decline. It is now at the lowest level for the year.

UBS market strategists believe investors are very concerned about the future of the economy, although they admit the Index was taken prior to the recent Federal Reserve interest rate cuts.

Unlike the Merrill survey, the UBS Index shows more investors willing to reevaluate their portfolios. "Recent market turmoil has led more and more investors to review their personal holdings, with 34% reevaluating their portfolio," says a UBS spokesperson.

Of those who have made such reevaluations, 58% are holding more cash or equivalents, 43% reduced their investments in complicated financial instruments such as mortgage-backed securities and only 20 % cutting investments outside the U.S.

Interesting how some things that change seem to stay the same. Check out this quote from a UBS executive back in April. "Investors are feeling the pinch of a volatile stock market, continued slowdown in the housing sector and high energy prices. All of these issues directly affect investor perceptions of their personal wealth and expectations of future performance of their portfolios. This is especially so given the recent focus on the fallout in the sub-prime mortgage market," said Mike Ryan, Head of UBS Wealth Management Research Americas.
(www.ubs.com)

Looking at Mutual Funds? Take the Long View

Investors tend to keep a sharp eye on how their mutual funds are performing. The closer you look, the more tempted you may be to alter some of your picks.

But prudence and patience may be a better course, at least according to a study by researchers at DiMeo Schneider & Associates. They found that almost 90% of the 402 funds that came in the top 25% of their categories for the 10-year period that ended December 31, 2006, had at least one three-year period during which they were at the bottom half of their peer group.

In fact, more than 50% were behind the median for at least one five-year period.

The reports advises investors to study how a fund performed over full market cycles - low to high and high to low periods.
(www.dimeoschneider.com)