Stock pickers crave safety in market unnerved by Covid variants

There are so many things to do the investors worry right now and it is showing in financial markets. In the US, investors are returning to their favorite pandemics, sending the Nasdaq 100 Index to new records, and cash has poured into bond funds and money markets this week.

Many investors say they are looking for refuge. Pictet Wealth Management are choosing big companies over small ones. Janus Henderson Investors have reduced their allocations to the UK and Europe in favor of Japan.

“The impetus is with variant, not vaccine,” said Paul O’Connor, head of multi-assets at Janus Henderson in London. “It is quite reasonable to expect there could be a period of consolidation that lasts until we understand all of the Covid front, and for me that could take a few months.”

Bloomberg

Markets have long been able to safely take on the pandemic in the belief that a vaccine and government stimulus will pave the way for a return to normalcy. But with cases skyrocketing again and Apple Inc. Even delaying the reopening of offices, the trajectory no longer seems certain.

There is also price pressure. In an interview on Bloomberg Television, Ed Hyman, President of Evercore ISI, predicted that US inflation is likely to exceed expectations and create a challenge for the Federal Reserve.

“We have a combination of all these effects, so the market doesn’t really know: are we reopening or not? Does it have inflation now? Does it deflate? ” said Randeep Somel, a fund manager at M&G Investments in London. “The best place is probably in quality growth companies.”

Moderna Inc., Twitter Inc. and Facebook Inc. led gains in the S&P 500 this week as traders grabbed internet and biotech stocks. On the opposite end of the equity spectrum, the Russell 2000 Index and the S&P 500 Value Index have fallen in value for weeks.

Bloomberg

Investors added $13 billion to bond and cash funds in the week to July 21, compared with $3.3 billion to stocks, according to data from Bank of America Corp.

However, almost no one believes that there is enough bad news to end the bull market. Instead, the argument that often comes from investors is that, given the current backdrop of record highs and prolonged valuations, more caution is needed now than caution.

“There are only a handful of factors that will hold the market back,” said Janus Henderson’s O’Connor. “It doesn’t make us discount. We are not calling the top of the market here. ”

Bloomberg

Pessimism is also evident in the views of strategists. Morgan Stanley ask investors to buy American staples and cut back commodity stocks. Bank of America strategists said the US recovery looked “increasingly weary” and left their stance on European stocks neutral.

In the thoughts of Nigel Bolton, co-chief investment officer of BlackRock’s Fundamental Equity Group, now is the time to lock in profits for the winners and move on to more stable companies, like tech and pharmaceuticals. big.

“There is a big question mark around when the next variant might need the booster and if we have it,” said Virginie Maisonneuve, global equity investment director at Allianz Global Investors. . “I wouldn’t bet everything on cycles.”