The rally in equities may slow amid turmoil from Greece to Libya and Japan, said Sybren Brouwer, the global head of equity research at ABN Amro Bank NV's private-banking division. He said his team reduced its allocation for shares to ''neutral'' from ''overweight.''
''We've had the Europe debt crisis and increasing inflation concerns in the emerging markets, and on top of that we had unrest in the Middle East and Africa and of course the natural disaster in Japan,'' said Brouwer, who helps oversee more than $200 billion. ''Adding that all up makes us a little bit more concerned on equity markets in the short term.''
Greek Bond Yields
Yields on 10-year Greek bonds reached a record 13.84% last week amid concern Europe's most-indebted nations will be forced to restructure. Oil climbed as high at $113.46 a barrel on April 11 and Japan raised the severity rating of the nuclear crisis at Tokyo Electric Power Co.'s Fukushima Dai-Ichi plant to the same level as the 1986 Chernobyl disaster.
Historical volatility for the S&P 500 has averaged 19.5 since March 2009, higher than the first two years of all rallies dating back to 1942, based on 30-day data compiled by Bloomberg and Birinyi Associates Inc., the Westport, Conn.-based research firm. The measure of daily swings is above the levels of 16.3 during the 2002 rally and 13.2 from the 1990 advance, data compiled by Bloomberg show.
The prospect of higher interest rates may be driving fixed- income investors to hybrids. Bond prices dropped 5.5 cents since Sept. 30 to as low as 105.93 cents on Feb. 8, the least since June, sending yields up 59 basis points, according to Bank of America Merrill Lynch's U.S. Corporate Master Index.
Corporate-Bond Returns
Credit analysts at firms including New York-based Goldman Sachs and Bank of America Corp. in Charlotte, N.C., forecast that returns would be below 10% from corporate bonds this year.
The yield on 10-year Treasury notes will reach 4.05% by March, according to the median estimate of 66 economists surveyed by Bloomberg, up from 3.41% on April 15.
Balanced funds have beaten U.S. investment-grade company debt for seven of the past eight months, returning 17 percentage points more over the period, according to data compiled by Bloomberg and Barclays. They've increased 4.6% this year, trailing the S&P 500's 5.5% advance including dividend payments.
''The whole area of balanced fund investing has really made a resurgence," said Hayes Miller, the Boston-based head of asset allocation in North America at Baring Asset Management Inc., which oversees $51.6 billion. For individuals, "the safest way they feel they can go about it is to pass that asset allocation decision along to a professional."