U.S. fund managers made no significant tweaks to their model global portfolio in October compared to the previous month, a Reuters poll found, as market volatility caused by concerns about a slowing global economy appeared to be temporary.
Global equity allocations held at 51.3 % of the model portfolio, the first time it wasn't downgraded in five months. Within that, fund managers increased recommended North American stock holdings slightly to 69.1 % from 68.8 %.
They also boosted euro zone and UK recommendations but trimmed Japan, Latin America and emerging Europe.
But as the U.S. economy prepares for an impending interest rate hike, wealth managers cut recommended bond allocations slightly to 37.6 % in October from 37.8 %, the first month that debt holdings didn't rise since May.
Within the fixed-income portfolio, fund managers cut North American bond allocation recommendations to 72.1 % in October, the lowest in six months.
"We felt the market volatility was transitory in September, therefore we weren't reallocating toward bonds to protect from further market downside," said Jeff Layman, chief investment officer at BKD Wealth Advisors.
"So far in October, this view has been validated, with global equity markets posting returns greater than 7 % month-to-date."
On Wednesday, Federal Reserve Chair Janet Yellen indicated a December interest rate hike was still on the table, highlighting encouraging growth rates in business investment and consumer spending, as well as the recovery in the labor market.
Financial markets are now pricing in a 43 % chance of policy tightening in December, compared to 34 % earlier, although a solid majority of economists in a separate Reuters poll predict the Fed will act then.
Both the dollar and bond yields soared soon after the Fed's statement, and U.S. stocks, which fell initially, rallied and closed higher. The Dow Jones and the S&P 500 gained around 9 % in October, as companies reported quarterly earnings.
Asset managers left their recommendations for cash and property holdings steady in October, at 3.9 % and 1.3 % respectively. Average allocations to alternate investments edged up to 5.8 % from 5.7 %.
Photo by Chris Smith on Flickr.