From stocks to Bitcoin, investors have bet that the “everything rally” will continue

The S&P 500 ended the year up 68% from its March lows, after losing more than a third of its value in about a month. Government bond yields, which are falling as prices rise, remain close to historic lows. Meanwhile, corporate bond yields declined after the turmoil at the beginning of the year. This means that many bond investors ended the year with gains. And US crude oil prices fell back nearly $ 50 a barrel after falling briefly below $ 0 for the first time in April.

After the sharp rise during a global pandemic has highlighted confidence that central banks and governments will support the global economy, many investors are now waiting for the delivery of vaccines to the buoyancy markets.

Sentiment measures from organizations, including the American Association of Individual Investors, show low to multi-year lows. Meanwhile, tens of billions of dollars have recently entered into mutual funds and traded on the stock exchange that track stocks. Both trends preceded withdrawals from the past, signaling excessive optimism to cautious investors. Some draw parallels with oversized gains in late 2017 and early 2018, before trade tensions and higher interest rates ruin markets.

“Investors can’t risk enough – whatever that is,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “The moment is a strong force and we do not want to fight it.”

The company maintains its investments in US shares in accordance with the benchmark it pursues and favors the economically sensitive industrial sector. At the same time, it avoids increasing its stocks and remaining in a neutral bond position.

Analysts still see potential increases in speed on the horizon, including a recent increase in coronavirus cases and a pair of races in Georgia this week that will determine which party controls the Senate under President-elect Joe Biden. Democrats who gain control could raise concerns about higher taxes for corporations and investors with capital gains, traders say. Higher tax expense bets could also affect bonds and produce higher returns.

However, many observers still expect ultra-low interest rates to continue to support bonds, while pushing investors to reach higher-yielding assets. With many US technology stocks registered, many investors buy shares of economically sensitive companies, commodities and shares of companies in emerging markets, all of which remain below their peaks.

Their gains highlight the optimism that the economy will grow in the second half of 2021, even if the coming months will provide obstacles to recovery.

“We truly encourage our customers to look beyond” the turmoil anticipated in the first half of 2021, said Meghan Shue, head of investment strategy at Wilmington Trust. The company has increased its investments in US stocks and emerging markets in recent months.

Companies, including Apple Inc.

who benefited from the tendency to stay home ended the year with stunning market values, while everything from electric vehicle manufacturer Tesla Inc.

to the copper manufacturer Freeport-McMoRan Inc.

also posted large returns.

This underscores the growing breadth of the rally, but high projections for both the technology sector and more growth-sensitive actions remain a concern for some money managers.

“Expectations for certain segments are too cooked up,” said Lee Baker, president of Apex Financial Services in Atlanta. He advises customers to favor banks and cheaper travel-related actions in the new year.

Fund managers surveyed by Bank of America last month said they have less money than benchmarks they are looking for for the first time since May 2013, another indication that investors are moving money to riskier parts of the market. Many respondents have increased their investment in areas such as emerging markets recently.

“These markets have much more potential for recovery,” said Michael Kelly, global head of multi-set at PineBridge Investments. He has favored emerging markets, as well as French and Spanish stocks in recent months, believing that an increase in global growth, aided by government stimulus, will help him outperform.

Investors were especially encouraged by recent economic data showing the Chinese economy advancing after the country largely contained coronavirus, an advantage for other emerging markets and commodity producers. Analysts now hope that the US and Europe will catch up.

Even with the worsening of the pandemic in those regions, economic data has remained largely constant, with the launch of vaccines giving more confidence to consumers and businesses.

This also helps the large recovery of stocks related to the pandemic-affected sectors, including travel and leisure, but some investors are concerned that those companies will not meet high expectations as the recovery progresses.

“You have to watch out for some of these reopening transactions where the sentiment isn’t already priced in,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments. It favors faster-growing companies related to technology infrastructure and expects a withdrawal to add to their positions.

Write to Amrith Ramkumar at [email protected]