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Bull run not over yet, say investors

The S&P 500 could peak another 16pc higher, investors believe, indicating they think the bull run in markets is not over yet - AFP
The S&P 500 could peak another 16pc higher, investors believe, indicating they think the bull run in markets is not over yet - AFP

Turmoil in global markets is a temporary phenomenon and stocks still have further to rise, investors believe.

The S&P 500 index in the US should be able to rise by around another 16pc to 3,100 points, the average fund manager predicted in the Bank of America Merrill Lynch’s monthly survey.

Such confidence on the part of buyers indicates the recent slump in markets should not last long, as money will still be directed into shares - the managers surveyed look after more than  $500bn of assets.

The headline US index peaked at almost 2,900 last month before a sudden dip to below 2,600.

Now the S&P 500 stands at 2656.

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This sharp sell-off does appear to have made investors more cautious, however, despite their confidence in a continued rise in markets.

The survey found a record jump in the net percentage of investors taking out protection against falls in prices, while the average cash balance ticked upwards from 4.4pc in January to 4.7pc in February, as investors moved away from equities.

Fund managers are also aware of the current risks, with 70pc describing the global economy as being in the “late cycle” phase, indicating a slowdown could come in the relatively near future.

“While this month’s survey shows that investors are holding on to more cash and allocating less to equities, neither trait moves the needle enough to give the all clear to buy the dip,” said Michael Hartnett, the bank’s chief investment strategist.

Jerome Powell - Credit: Andrew Harrer/Bloomberg
One risk is that inflation will shoot up, forcing the Federal Reserve, now headed by Jerome Powell, to hike interests more rapidly Credit: Andrew Harrer/Bloomberg

By region, investors favour the US rather than Europe, seeing more growth in American markets.

“European equity allocation is at its lowest in almost a year,” said Manish Kabra, head of European quantitative equity strategy.

“Despite improving confidence in European earnings, the US and Emerging Market profit cycles seem more favourable to investors right now.”

The biggest hazard which could derail markets is the chance of a surge in inflation and a bond market crash, which was cited as the top 'tail risk' by almost 50pc of fund managers surveyed.