Since 2022, stock market commentary has been awash with mentions of a ‘Great Rotation’. This is the idea that investors were, have been, or indeed are reallocating away from the prevailing trade of the past 15 years, namely growth-oriented large-cap stocks.
As to which investors are doing the rotating, and quite what they are rotating ‘into’, is hard to pin down. One version of the narrative has it that pronounced stock market volatility and higher interest rates have increased the relative attraction of less risky assets such as cash and fixed income, leading to a shift from equity-led growth to near-guaranteed real returns.
If this has happened, it’s hard to see from the aggregate data. As the largest custodian bank in the world, US asset management giant State Street offers a good real-time overview of exactly that. However, its institutional investor indicator shows only very small shifts in the balance between cash, equities and fixed income as a proportion of total holdings.