The MSCI developed and emerging equities indexes are up over 17 percent, for example, and few if any of the major equity markets are on course to end 2012 in the red. Respondents to Reuters' latest monthly poll of 55 asset managers from the United States, Britain, continental Europe and Japan said they remained upbeat for the year ahead, backing moves into euro zone stocks and bonds, Chinese equities and emerging market debt in their hunt for yield.
But strategic asset allocation mixes appeared to stay cautious on lingering fears of the US "fiscal cliff" - the automatic tax and spending crunch Democrats and Republicans have seeking to avoid since last month's election. "Provided both sides of the US political divide can find a way to resolve the current US 'fiscal cliff' impasse, and we can overcome other headwinds 2013 will hopefully see a further improvement in confidence," said Mark Robinson, chief investment officer of Berry Asset Management.
The poll shows global investors have more conservative positions on average this month than a year ago and the highest bond allocation in at least three years, with many citing tensions over the year-end deadline on the so-called cliff of harsh tax hikes and spending cuts that could damage an already weak economy.
"I remain neutral on the markets while the uncertainty and risks surrounding the (fiscal cliff) are resolved," said Alan Gayle, chief strategist at Ridgeworth Investments. The stalled US fiscal talks grew more heated on Wednesday and threatened to become even more so Thursday when the action is expected to shift for the first time to the floor of the US House of Representatives. Stock holdings are at 49.7 percent on average in the poll this month, down half a point from last month and 1.6 percentage points from December 2011.
Compared to the same time last year, allocation to bonds is 4.4 percentage points higher - benefiting investment grade corporates, while high-yield and government debt are down. Looking forward to 2013, a deal on the fiscal cliff - still the baseline scenario for most - is likely to push investors back towards stocks, fund managers said.
British investors bucked the trend, greeting the year-end with a sharp increase in the amount they invest in shares, reflecting hopes that economic stability and rising corporate profits will return next year. Their average allocation to equities in global balanced portfolios jumped to 52.3 percent in December, from 50.8 percent a month earlier.
"The risks facing markets in 2013 are more likely to be normal risks, as opposed to the systemic, potentially extreme risks which markets faced in 2012," said Alec Letchfield, chief investment officer for UK Wealth at HSBC Global Asset Management. US fund managers, however, adopted their most defensive stance so far this year, with average equity holdings hitting a more than 13-month low.