Bonds shine again as Great Rotation gives way to Asset Reflation
By Jamie McGeever and Mike Dolan
LONDON (Reuters) - Last Thursday morning investors queued around the block to buy the bonds of recent defaulter Greece, and by the end of the day were selling U.S. tech stocks furiously.
In an investment world so used to the concept of 'risk on' or 'risk off' over recent turbulent years, the behavior was puzzling. So what happened?
Observers point to a combination of three drivers - stocks valued too highly, global growth failing to meet expectations and underlying investor behavior since the turn of the year - but curiously no single catalyst.
Many stock markets around the world, including those in both developed and emerging countries, are at or near their highest levels ever thanks to central banks propping up the global economic recovery with their ultra-loose monetary policy.
In the United States the S&P 500 .SPX has almost tripled its level since the post-crash trough in March 2009, while the Nasdaq Composite .IXIC index weighted more towards technology stocks has gained almost 250 percent in that time.
This meant that at the end of March, U.S. stocks were the third most expensive in the world behind Japan and Mexico, analysts at Barclays estimate.
In its latest monthly poll of global fund managers, Bank of America-Merrill Lynch said the proportion of investors who think stocks are "over-valued" is now the highest since July 2000, just when the Nasdaq was in the early stages of collapse.
So perhaps a correction was on the cards. Continued...