A 'Great Rotation' out of bonds into stocks is only just underway and is setting up to be one of the major investment themes of 2014, strategists say.
Equities, boosted by monetary stimulus from central banks and a recovery in the global economy, are the best performing asset class so far in 2013. U.S. stocks have hit record highs this month, fueling talk of a stock-market bubble, while Japan's blue-chip Nikkei stock index is up a hefty 45 percent this year.
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Government bonds meanwhile have fallen out of favor and yields have crept up in recent months as investors brace for an unwinding of the Federal Reserve's bond-buying program.
"The Great Rotation has started and if you look at the U.S., we've had record redemptions in bond funds this year and of course when the Fed tapering fears started even more people piled into equities," said Beat Wittmann, CEO of TCMG Asset Management, which has roughly $10 billion worth of assets under management.