* Equity allocation up for the first time in four months
* Average weighting to Japan stocks up
* Bond allocations held steady
By David Randall
NEW YORK, May 30 (Reuters) - U.S. money management firms increased their holdings of stocks in May for the first time in four months, a Reuters poll shows, helping propel a global market rally that sent the benchmark S&P 500 to a series of record highs.
The rally has stalled in the past week on concerns that the U.S. Federal Reserve may start to taper its stimulus program, potentially pushing market interest rates higher.
Yet some portfolio managers say that the broad market may continue to push higher despite the nearly 16 percent jump in the S&P 500 .SPX for the year through May 29.
"We think there is a rotation going on, and the next move will favor cyclical sectors over defensives," said Alan Gayle, director of asset allocation at RidgeWorth Investments who manages $325 million in four portfolios.
Any drop in the equity market on expectations for future tapering of the Fed's $85 billion in monthly asset purchases would only be short term and represent a buying opportunity, Gayle added.
Equity allocations in U.S. investors' global portfolios increased to an average of 59.1 percent at the beginning of May, the highest proportion since March.
The biggest increase was into Japanese stocks, following a massive bond-buying stimulus programme launched by the Bank of Japan to try and revive the world's No. 3 economy.
The average allocation to Japanese equities rose to 7.5 percent of equity portfolios from 6.2 percent in April, capping a three-month period in which the average portfolio allocation to Japanese stocks has nearly doubled.
The poll was conducted between May 15 and 28.
U.S. asset managers largely kept their allocation to bonds steady, with the average holding increasing to 34.8 percent of assets from 34.6 percent in April. May marked the fifth straight month that investors had maintained or increased their bond exposure.
Holdings of U.S. and Canadian debt fell to 63.3 percent of bond portfolios, from 66.3 percent a month earlier. The average holding of euro zone debt rose to 13.7 percent from 12.1 percent.
For a table on the poll results, click on [ID:nL3N0EA2FI]
Full list of Reuters asset polls, click on [ID:n:L5N0EB14T]
(Polling By Namrata Anchan and Ramya Muthukumaran; Editing by Linda Stern and Susan Fenton)
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