By Tushar Goenka

BENGALURU, (Reuters) – Global fund managers recommended keeping equity allocations stable at a nearly four-year-high in a model portfolio in this month’s survey by Reuters. This was mostly prior to the recent COVID-19-related volatility in stock markets.

A poll of 35 chief investment officers and fund managers in Europe, America, and Japan from November 15-30 showed that equity exposure was unchanged at 50.3% on average, which is the highest level since 2017. Bonds were also stable at 39.0%.

Investors and traders sold their stocks late last week after the discovery of Omicron (a potentially vaccine-resistant coronavirus variant), marking the worst week in global share prices since October.

Stock markets, however, have rebounded since then.

Craig Hoyda (senior quantitative analyst at abrdn) stated that although these COVID-19 risk had been priced out, they will continue to be a significant threat to the markets.

While there are strong arguments to remove risk – even a slight cut to equity positions, it is not wise to act in an extreme manner by rotating all portfolios.

With their British and European counterparts the up approximately 9% and 16% respectively, the U.S. benchmark and Dow Jones indexes are up 24% & 15% on the year.

Investors are focusing on when major central banks such as the Federal Reserve, which began tapering their support for this month’s economy, will begin raising interest rates to reduce inflation.

We are most concerned about the complacency and lack of central bank actions. Matteo Germano is global head for multi-asset, Amundi. “Central banks keep repeating the transitory narrative in a kind of benign neglect to inflation risk.” said Matteo Germano.

“Inflation now all around: it used to be a U.S.-exclusive story. It is now spread across developed and emerging markets with the notable exception of China.

Respondents were nearly evenly divided when asked about the likely outlook for local corporate earnings. One-fifth of the 21 respondents stated they would increase, and one in ten said that they would decline.

Peter Lowman (chief investment officer, Investment Quorum) stated that while we remain optimistic about the outlook for corporate earnings in 2022, recent increases in inflation and supply chain bottlenecks, as well as a pullback in global GDP, are short-term concerns.

Consumer spending is certain to help the numbers during the fourth quarter, and the global economy will pick up through 2022. There may also be some surprises for corporate earnings.

(Reporting & Polling by Tushar Inoue and Fumika Inoue in TOKYO, Editing by Emelia Sithole-Matarise