“The weaker data and earnings would encourage higher volatility after an unchallenged rally throughout the first quarter,” Andrew Greeley, a senior managing director at Stamford, Connecticut-based Acorn Derivatives Management Corp., which manages more than $450 million in volatility assets, said on April 5.
Even bulls are taking steps to protect profits after gains in U.S. stocks added $10 trillion to equity values.
Russ Koesterich of BlackRock Inc. and Valentijn Van Nieuwenhuijzen at ING Investment Management, who bought equities in 2012, say risks are rising during a period in which stocks have lost an average 5.2% since 2010, data compiled by Bloomberg show. Concern the U.S. economy isn’t expanding fast enough prompted Koesterich to sell smaller companies. Van Nieuwenhuijzen is holding off on new share purchases.
Investors managing more than $5 trillion say they’re looking for ways to limit losses after the S&P 500 reached a record. That got harder in the first quarter, when rallies in drugmakers and utilities pushed valuations for so-called defensive industries to the highest since 2008.
“You have an increased risk of a correction now,” Koesterich, the chief investment strategist at New York-based BlackRock, the world’s largest money manager with $3.8 trillion in assets, said in an April 4 phone interview. “The parts of the market that have done the best, the defensives, have gotten very expensive,” he said. “This is a very different rally than what people are used to.”