Jun
15
Funds looking to pullback to get in stocks
Junho 15, 2009 |
NEW YORK (MarketWatch) — Funds, sitting on huge advances scored by the market over the past three and a half months, are likely to overlook current market hesitations to hang onto their gains until the end of the quarter, analysts said.
With funds due to present statistics on their quarterly performance to clients in less than three weeks, institutions have been holding firm cautiously on cash positions.
As the stock market showed signs of hesitation last week, institutions kept their cash levels unchanged instead of putting the money to work and adding to positions in the market, according to Cantor Fitzgerald.
“Thus far, institutions are waiting for a pullback that will give them a buying opportunity before the end of the quarter,” said Marc Pado, U.S. market strategist at Cantor.
Before the end of the quarter, “there is a tendency to capture some gains and move the money into sectors that have not performed as well, ” said Ken Tower, market strategist at Quantitative Analysis Services.
The technology sector on the S&P 500 has performed best out of the index’s 10 sectors so far this year, up about 25.4%.
Some funds will eventually try to sell underperforming stocks and buy strong ones just before issuing quarterly reports — the so-called practice of window dressing.
Sectors that have performed best most recently will benefit. For the first half of June, technology is again leading, up 5.1%, followed by industrials, up 4.9%; energy, 4.2%; and consumer discretionary, up 3.3%.
As for the quarter to date, financials are leading the gains, up 40.8%. Next up are industrials, about 26.8% ahead, followed by materials, up 25.4%, and energy, up 20.3%.
“The mentality remains one of buying-the-dips, that the worst is over, but people need a better entry point,” said Alec Young, market strategist at Standard & Poor’s. “We might get that before the end of the month.”
While window dressing might not start just yet, fund managers are likely to allocate their money in a way that reflects their expectations about an economic recovery, he added.
S&P, for one, believes hopes for a quick economic recovery might be overblown, and Young therefore recommends staying away from industrials and consumer-discretionary stocks, in the belief these might get hit as unemployment remains high and gasoline prices rise.
Nick Godt is a MarketWatch reporter based in New York.