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NEW YORK - Mutual funds, pensions and endowments are spending more on stocks than at any time since the start of the bull market, just as individuals grow the most pessimistic in a year.
Institutions pushed equities up to 68 percent of their holdings in July, the highest level in 15 months, from 63 percent in April, a Citigroup Inc survey showed. The ratio of bullish to bearish respondents in a survey by the American Association of Individual Investors has fallen to 0.68, the lowest level since July 2009, based on a four-week average.
The last time money managers and individuals were this far apart was in March 2009, before the Standard & Poor's 500 Index began its 63 percent rally, according to data compiled by Bloomberg. It may signal another buying opportunity after concern the US economy will fall into a recession wiped out $1.6 trillion from American equity values since April, according to Fritz Meyer, a Denver-based senior market strategist at Invesco Inc, which oversees $558 billion.
"That's good news," Meyer said. "The retail guy has gotten it wrong more than gotten it right. The odds favor a continued, reasonably healthy economic expansion."
The US equity benchmark has posted an average return of 8.8 percent in the 12 months after individuals' skepticism rose this high in the past 20 years, according to data compiled by Bloomberg. Bulls are betting that forecasts for the fastest US profit growth in 15 years and economic expansion averaging 3 percent through 2012 will help equities recover after the S&P 500 fell 13 percent in May and June.
Bonds are a better investment than stocks, said Jamil Baz, who helps oversee $23 billion as chief investment strategist for the New York-based hedge fund GLG Partners Inc.
Government reports this month showing private employers in the US added fewer jobs than forecast in June and the lowest level of housing starts in eight months raised concerns that the economic recovery will falter.
Equities advanced last week as the S&P 500 gained 2.7 percent, poised for the biggest monthly increase since July 2009.
Bloomberg News
