Jan. 28 (Bloomberg) -- Investec Asset Management has reduced its holdings in risk assets on a so-called tactical basis amid signs the market is starting to look overbought and may soon consolidate.
Philip Saunders, who helps oversee more than $100 billion as head of multi asset, said while the fund manager remains materially overweight the asset class, it is right to “take the edge off that exposure” in the short term.
“We have been punchy in terms of investing on a strategic and tactical basis since last summer,” Saunders said at a media briefing in London today. “There are a lot of measures that tell us that the market is looking pretty overbought and that tells us that there is going to be some kind of consolidation or a setback.”
The Standard & Poor’s 500 Index has climbed 5.3 percent so far this year to close above 1,500 last week for the first time since 2007, as U.S. lawmakers agreed on a compromise budget, avoiding the automatic tax increases and spending cuts that had threatened the economy. The benchmark Stoxx Europe 600 Index has climbed 3.5 percent during the same period.
Saunders said the market is now moving into the expansion phase of the cycle and if it can consolidate in the short term, it will resume its upward trajectory.
“If the market suffers the kind of correction it has suffered over the last couple of years then all bets are off,” Saunders said from Investec’s London office. “If it consolidate and the short-term sellers like ourselves get absorbed by longer-term buyers, then I think the stage is set for this phase to continue.”
John Stopford, co-head of fixed income and currency at Investec, said the rotation into equities from bonds was more evident among retail investors than institutions.
“At the margins, it is happening and in some of the faster-moving parts of the market it has started,” Stopford said at the briefing. Investors’ motivation to consider equities had increased, he added. “Whether it’s in the next six months or 12 months? I can’t answer that.”
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