Bullishness is back, and banks feel the benefit

FS Adam Lewis 160 byline

Having worked a stones throw from HMV’s flagship store for over a decade a mild form of cold sweat forms when I think how much money I have piled into that institution over the years gone by. Meanwhile I must be one of the handfuls of people left in the country who occasionally pops into Blockbuster to pick up a film after Lovefilm has again delivered a movie that was at the very lowest of my priority list.

Hence last week’s news of the two going into administration was greeted with some sadness in my household at least. Indeed given the demise of these two high street stores, combined with Jessops recent slip into administration, you could be forgiven for thinking investors might not be at their most bullish right now. Yet despite retail woes according to the Bank of America Merrill Lynch global fund manager survey for January risk appetite among investors is at its highest level for over nine years, with expectations for global economic growth hitting a 33-month high.

Meanwhile having spent a total of 2,157 days underweight in global banks January saw investors move overweight for the first time since February 2007, following a month-on-month 15 percentage point move to a net 3 per cent overweight. Indeed, UK managers are also getting in on the act. BlackRock’s Richard Plackett told Fundweb last week that in his £1.65bn Special Situations fund he has “significantly” upped his bank exposure from a previous large underweight.

According to the survey, investor confidence surged following the partial resolution to the US fiscal cliff and a net 59 per cent of those managers asked now expect the global economy to strengthen in 2013, compared with a net 40 per cent in December. As well as piling into riskier assets – with the so-called defensives taking the brunt – January saw asset allocators assign more to equities than at any time since February 2011, while the weighting to bonds fell to its lowest since May 2011.

These numbers are in line with last week’s outlook cover story which predicted 2013 could be the year for equities. Indeed according to BofA ML, the widening gap between bond and equity allocations continues to suggest we are in the early stages of the “Great Rotation from bonds to equities”.

Meanwhile elsewhere in this week’s issue Daniel Ben-Ami looks at what a future Labour government would look like if they were voted in at the next general election. Labour’s leader Ed Miliband has been strong on catchphrases and undermining the Coalition’s attempts of getting the UK economy back on track, but what would it do differently if it was voted? Or is it a case of catchphrase over substance? To find out click here.