By: Stanley Fefferstein
Investors are showing themselves to be more than a little bearish, according to heavyweights at Bank of America Merrill Lynch.
During the course of the past half year, $322 billion went to money market funds, the greatest “flight to safe assets” that money managers have seen since late in 2008.
“In similar fashion to 2007 and 2008, investors raised their cash holdings despite falling interest rates,” noted Crain’s New York Business. “Strategists led by Michael Hartnett wrote in a note on Friday that investors are suffering from “bearish paralysis,” driven by unresolved issues such as the trade war, Brexit, the Trump impeachment investigation and recession fears. Just in the seven-day period ending Oct. 9, investors continued to exit equity funds globally, with outflows reaching $9.8 billion, according to the strategists who cite data from EPFR Global. By contrast, bond funds enjoyed $11.1 billion of inflows.”
No matter the downsides, the strategists contended, they hold an “irrationally bullish” contrarian view, driven by the “bearish positioning, desperate liquidity easing, and ‘irrational contagion’ from bond bubble to equities,” Crain’s reported. “After Greece auctioned negatively yielding bills and the U.S. auctioned record low-yielding 30-year government bonds this week, they see the current positioning in bonds delaying a global recession, which should drive further equity performance.”
Others are also using the word ‘bearish.’
“Experienced investors entered the fourth quarter in a downbeat mood, according to E-Trade Financial’s StreetWise quarterly tracking study, released Friday,” reported thinkadvisor.com. “Bearish sentiment rose to 50%, up 11 percentage points from the third quarter. Forty-seven percent of investors said U.S. trade tensions were the biggest risk to their portfolios. Thirty-four percent cited recession as the chief risk, and 24% gridlock in Washington.”
At the same time, the web site continued, “Worries about recession jumped six points since the last quarter, according to the study. Fifty-two percent of participants said the U.S. economy had reached its peak, up 16 points since the beginning of the year. Investors who said they would give the economy an ‘A’ or ‘B’ grade plunged 11 points quarter over quarter to 58%.”
Two days ago, E*TRADE Financial Corporation announced results from the most recent wave of StreetWise, the E*TRADE quarterly tracking study of experienced investors. Those results indicate increasingly bearish investor views, the company said in a release.
Bearish sentiment rose. Bearishness rose 11 percentage points since last quarter, to 50%.
* Trade concerns loom large; recession concerns grow. Nearly half of investors think US trade tensions pose the biggest risk to their portfolios (47%), followed by recession (34%), and gridlock in Washington (24%). Recession concerns ticked up six percentage points since last quarter.
* Majority think we’ve reached our peak. More than half of investors believe our economy has reached its peak (52%), up 16 percentage points since the beginning of the year.
* And fewer give the economy a good grade. Nearly three out of five of investors would give our economy an “A” or “B” grade (58%), down 11 percentage points since last quarter.
