With the S&P/ASX 200 Index (ASX: XJO) going above 6,500 points this week for the first time since February, ASX investors certainly have something to be happy about. The ASX 200 is now well and truly out of the 'rut' it was stuck in between June and October. By 'rut', I'm referring to the fact that the ASX 200 seemed to never get too far above, or below, the 6,000 point threshold for those 4 months.
Now the ASX 200 is seemingly pushing to greater heights this week. So I'm sure many an investor is wondering 'where to next?' for ASX shares, given we're barrelling towards a new year.
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Where are fundies investing for 2021?
Well, reporting in the Australian Financial Review (AFR) today sheds some light on this question. The AFR is covering the Bank of America's monthly survey of more than 200 global fund managers (with a collective $784 billion in assets under management) for their views on how to position a share portfolio going forward. And the view is reportedly almost unanimous: "It's time to go long or go home".
The AFR reports that the fundies aren't too concerned over the recent 'second/third waves' of coronavirus cases around the world. Although they do note it's a risk. Instead, managers have "pulled forward their expectations for a credible vaccine to be announced from next February to next January. And are piling into trades that will benefit from the reopening of economies". Bank of America says the "US election outcome and the announcement of promising results from vaccine trials" are behind the "switch in the psyche of investors".
And that is resulting in cash positions being whittled to "15-year lows". Where is this cash going? According to the report, there are 3 areas which are overwhelmingly popular amongst the fund managers: emerging markets, oil, and the S&P 500 Index (INDEXSP: .INX).
A triumvirate of opportunity?
Emerging markets refer to the economies (and stock exchanges) of countries outside the 'advanced economies' of the world. Specifically such as the United States, United Kingdom, Europe, Japan, Canada and Australia. As an example, a typical exchange-traded fund (ETF) covering emerging markets is the iShares MSCI Emerging Markets ETF (ASX: IEM). This ETF is weighted 40.56% to China, 12.67% to Taiwan, 12.52% to South Korea, 8% to India and 4.88% to Brazil.
Oil is an interesting choice as well. Oil prices and companies have been decimated in 2020 as a result of the pandemic. Many are sitting at multi-year share price lows. Take Woodside Petroleum Ltd (ASX: WPL). It's currently trading at $21.77 after falling as low as $14.93 earlier in the year. Before 2020, you'd have to go back to 2005 to find similar pricing. It's a similar story with global oil giants like Exxon Mobil Corporation (NYSE: XOM).
Finally, the S&P 500 is the flagship index for US shares. Thus, a bet on the S&P 500 could be construed as a bet on the US shares, especially the larger companies like Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) and Apple Inc (NASDAQ: AAPL).
