While it is not shocking that fund managers are underweight commodities and utilities, it can be viewed as surprising that the fund managers surveyed by BofA Merrill Lynch are lightly allocated to pharmaceuticals stocks. The Health Care Select Sector SPDR (NYSEArca: XLV), which is heavily though not fully allocated to pharma, is up 32.9% year-to-date. The SPDR S&P Pharmaceuticals ETF (NYSEArca: XPH) has surged 41.3%.
Consumer discretionary tops the list of over-weighted sectors, something BofA Merrill Lynch recently warned about.
In a mid-August report, the bank outlined a bearish outlook on consumer discretionary stocks, saying it believed the sector is “the most overweight sector relative to the S&P 500 by large cap active managers,” while noting downside earnings risk and consumer vulnerability to rising interest rates. [Discretionary ETFs Slipping]
Still, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) is up almost 6% since August 16.
Chart Courtesy of Bank of America Merrill Lynch via The Reformed Broker