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Investors, Bullish on Growth, Continue Buying Stocks

Investors, Bullish on Growth, Continue Buying StocksInvestors, Bullish on Growth, Continue Buying Stocks

Global equity traders are no longer panicking about the world’s slowest growth rate in seven years.

They’re warming up to shares of companies that are most sensitive to the economic cycle—miners  technological and industrial firms—while turning away from utilities and consumer staples, Bloomberg reported.

The FTSE All World Cyclical Index is on track for its best two-month showing since 2012 relative to the FTSE All World Defensive Index, with members including Japan’s Toyota Motor Corp., Korea’s Samsung Electronics Co. and Switzerland’s ABB Ltd. soaring more than 12%.

While stocks have been ripe for a rotation for most of 2016, investors worldwide have been unwinding bets for a grimmer growth outlook in recent weeks amid better-than-expected economic and earnings reports and central-bank assurances of supportive policy in the wake of the UK’s secession vote. While bears doubt that the cyclical recovery will last, bulls are eyeing the turnaround as the beginning of the end for the three-year dominance of defensive stocks.

“The world looks like a brighter, more comfortable place,” said Andrew Cole, who manages £450 million ($589 million) as senior investment manager at Pictet Asset Management in London. He’s bought shares of miners, technology companies and UK homebuilders since March. “Suddenly earnings are improving, and with the economy looking better, there’s a desire to get a bit more cyclical. Positioning was just uber defensive.”

Economic data worldwide have beaten forecasts since the beginning of July, with Citigroup Inc.’s surprise index reaching its highest since February 2014 this month. American employers in July hired an unexpectedly large number of workers and new-home sales jumped to an almost nine-year high. Federal Reserve Chair Janet Yellen said Friday the US economy is approaching the central bank’s goals for employment and price stability. Traders have since forward bets for future rate increases.

In Europe, an index tracking European services and manufacturing showed the fastest expansion in seven months, while industrial production in India, China and Mexico continue to grow. Economists forecast global growth of 3.2% next year, versus 2.9% in 2016.

The FTSE All World Cyclical Index has jumped 9.5% since the end of June, versus a drop of 0.7% for a similar gauge tracking shares considered less reliant on the economy.

Financialtribune.com