Declines in bearish bets and data showing more hedge funds are speculating stocks will rise than at any time since 2007 may be signs that the pool of buyers for equities is being depleted.

A gauge compiled by TrimTabs Investment Research and BarclayHedge Ltd. measuring how heavily hedge funds are invested in stocks rose to 33% in January, the last month data are available, compared with an average of 29% since 2000. Shares borrowed and sold to profit from declines dropped four straight months to 3.3% of all stock at the end of January, according to data compiled by NYSE Euronext.

Keep Falling
Roubini said on March 9, 2009, that it was "highly likely" the S&P 500 would fall to 600 in 2009 and that the recession would last into 2010, even if the U.S. did "everything right with fiscal and monetary policy." The world's largest economy stopped contracting in June 2009, according to the National Bureau of Economic Research. The economist called for slower growth in October 2010, when he said GDP growth could slow to 1% by the end of last year as stimulus becomes a "fiscal drag." The expansion was almost three times that rate during the final three months of 2010.

Some developed economies may slide back into recession if oil surges to $140 a barrel, Roubini, chairman of Roubini Global Economics LLC in New York, told reporters in Dubai yesterday. The 52-year-old economist also said the European Central Bank may raise interest rates "too soon," curbing growth and hurting indebted nations including Greece that face record borrowing costs.

Corporate Bonds
The recovery turned a $1,000 investment in the MSCI All-Country World Index into about $2,097, including dividends, according to Bloomberg data. That compares with $1,593 for commodities, $1,277 for global corporate bonds and $1,044 for Treasuries, according to indexes compiled by Standard & Poor's, Goldman Sachs Group Inc. and Bank of America Merrill Lynch.

U.S. investment-grade debt performed better than bonds from other nations, returning 35% over the same period, while speculative-grade credit almost matched the S&P 500, rising more than 90% since March 9, 2009.

"Over the past few years anything associated with risk has done phenomenally well," said William Cunningham, co-head of global active portfolio management and head of global fixed income research at Boston-based State Street Global Advisors, which oversees almost $2 trillion. With interest rates likely to rise, "fixed income will deliver less than equities going forward," he said.

'Passing the Baton'
Fed Chairman Ben S. Bernanke has remained committed to the central bank's plan of purchasing $600 billion of assets through June and said March 2 that he hasn't ruled out an expansion of the program. There's a 90% chance the Fed will keeps its target for the overnight lending rate between banks in a range of zero to 0.25% at its June meeting, compared with an 87% chance a month ago, according to CME Group Inc. futures.

"The government is slowly passing the baton to the real economy, and we're moving from government stimulus to a self-sustaining growth," said Robert Doll, chief equity strategist for fundamental equities at New York-based BlackRock Inc., the world's biggest money manager with $3.6 trillion.

The leaders of the equity bull market are shifting as the U.S. economic expansion accelerates and investors become more willing to risk money on companies where weaker economic growth or earnings increases have pushed down valuations.

Equity Funds
The MSCI All-Country World Index's 100 worst-performing stocks of 2010 have risen 5.7% as a group this year, while last year's best performers fell 0.2%, according to data compiled by Bloomberg. U.S. stocks are beating developing-nation shares after the S&P 500 climbed 5.1% so far in 2011, compared with a 1.4% drop in the MSCI Emerging Markets Index.