Money Pros' Stock Market Outlook: Top 5 Sector Bets

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Russell Investments released results of its fourth-quarter survey of high-level money managers Monday. Here are the five key takeaways from its report.

1. Two-thirds of money managers are most bullish on emerging market stocks. That's in stark contrast to this time last year when only 16% of managers were bullish on emerging markets. About half of managers is bullish on foreign developed markets for 2013, while only a third was bullish on the category last year.

"Managers' increased bullishness for both emerging markets and non-U.S. developed markets equities probably reflects increased confidence in the situation in the eurozone and in China's policies regarding economic growth," Russell's report said. "This turnaround in bullishness may be reflective of managers' increasing comfort with the European crisis, if not from a perspective of resolution at least from a perspective of the situation being already priced into global markets.

"Additionally, managers are finding valuable opportunities, particularly within non-U.S. developed markets, because this asset class has been oversold due to the eurozone crisis."

IShares MSCI EAFE Index ( EFA ), tracking developed foreign markets, has returned 15.93% year to date after losing 12.25% in 2011.

IShares MSCI Emerging Markets Index ( EEM ) gained 15.76% year to date, following an 18.82% dive the year before.

By comparison, theSPDR S&P 500 ( SPY ) added 14.92% year to date, following a 1.89% uptick last year.

2. A majority, 61%, of managers is bullish on real estate. It marks a dramatic improvement from the year-ago period when only 14% were bullish on real estate.

"Increased bullishness for real estate may reflect manager reaction to more positive news about real estate in general and the fact that the asset class continues to look attractive to managers in their search for yield," the report stated. "After extended periods of high vacancy rates, existing real estate is benefiting from increased demand due to exceptionally low levels of new construction.

"Additionally, new construction may begin to see signs of life as the economy slowly improves."

Vanguard REIT Index ETF ( VNQ ), the largest real estate ETF by assets, has climbed 14.19% year to date. It returned 8.62% in 2011.

3. A little more than half of managers, 57%, is bullish on technology. Managers were more bullish on tech in the September survey. But they were mostly bearish on the sector last December.

Technology Select Sector SPDR ( XLK ) is ahead 14.00% year to date after rising only 2.61% last year.

4. More than half of managers were most bullish on technology, health care and energy.

"Technology has a long history in the top spot on the bullish sentiment list, as managers are attracted to the strong balance sheets and cash-flow generation of many technology companies," Russell's report said. "The health care sector may be the beneficiary of more clarity of direction based on the outcome of the U.S. presidential election.

"As for the energy sector, some managers see growing demand and others may want to hedge themselves against Middle East unrest. Additionally, some managers are seeing attractive opportunities in the natural gas and shale opportunities within the sector."

Health Care Select Sector SPDR (XLV) has popped 18.58% year to date vs. a 12.39% gain in 2011.

Energy Select Sector SPDR (XLE) lagged the market this year with a 4.14% gain, following a paltry 2.84% return in 2011.

5. Only 7% of managers are bullish on U.S. Treasuries for 2013. That's a dramatic reversal from this time last year, when three-fourths were bullish on government bonds.

IShares Barclays 20+ Year Treasury Bond (TLT), the largest ETF of its kind, is up 4.45% year to date after rallying an eye-popping 33.96% in 2011.

Follow Trang Ho on Twitter @TrangHoETFs .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: EEM , EFA , SPY , VNQ , XLK

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