Investor bullishness is at a 3-year high but concerns about inflation have soared, E*Trade survey reveals

NYSE TRADER
  • 65% of active investors said they are bullish about the current market in a recent E*Trade survey.
  • Meanwhile, the number of investors who said inflation is a top concern skyrocketed from the previous survey.
  • Inflation data released Tuesday showed prices increased more than expected in June.
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A small survey from E*Trade reveals that investors are growing more optimistic about the stock market, but are also significantly more concerned about inflation than they were a few months ago.

In a July survey of 898 self-directed active investors, 65% of respondents said they are “bullish” about the current market. That’s up from 61% in the previous quarter’s survey and marks a three-year high.

Meanwhile, concerns about inflation skyrocketed 21 percentage points from the previous survey, with 35% of respondents selecting inflation as one the top two risks they see to their portfolios. Market volatility (27%), coronavirus (23%), and a recession (17%) followed behind.

In the previous quarter’s survey, only 14% of respondents selected inflation as one of the top two portfolio risks.

On Tuesday, inflation data reflected in the Consumer Price Index showed that prices roses more than expected in June. CPI increased 0.9%, the largest one-month change since June 2008. Core inflation has now exceeded 0.7% for three consecutive months, though many on Wall Street and the Federal Reserve insist that inflationary pressures will be transitory.

“The headline CPI numbers have shock value, for sure; however, once you realize that a third of the increase is used car prices, the transitory picture becomes more clear. Inflation is rising, but things are well behaved and have not changed materially,” said Jamie Cox, managing partner for Harris Financial Group.

The survey was conducted from July 1-9 2021 among an online US sample of 898 self-directed active investors who manage at least $10,000 in an online brokerage account. The survey has a margin of error of ±3.20 percent at the 95 percent confidence level. It was fielded and administered by Dynata.

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A majority of investors believe the stock market is in a bubble – and many fear a recession, according to an E*Trade survey

Trader crowd NYSE
Traders and company executives gather for the Uber Technologies Inc. IPO on the trading floor of the New York Stock Exchange (NYSE) in New York, U.S., May 10, 2019.

  • A new E*Trade Financial survey of 904 active investors revealed that 66% of them believe the stock market is either fully or somewhat in a bubble. An additional 26% said the stock market is “approaching a market bubble.” 
  • The survey also revealed that recession fears linger. 32% of investors listed a recession as their top portfolio risk right now. 
  • This comes as US stock indices fly past records and major investors like Jeremy Grantham are voicing their bubble concerns. 
  • Visit Business Insider’s homepage for more stories.

Most investors believe the stock market is in bubble territory according to a new survey from E*Trade Financial.

Out of 904 active investors who manage at least $10,000 in an online brokerage account, 66% of them think the market is either fully or somewhat in a bubble, according to E*Trade. An additional 26% said the stock market is “approaching a market bubble,” while only 8% said stock valuations are “not close to a market bubble.”

The survey also revealed that recession fears linger. 32% of investors listed a recession as their top portfolio risk right now.

Bubble fears have come into sharper focus as stock valuations soar. Individual stocks like Tesla have ballooned, but the broader market is higher than average as well. The S&P 500 gained 16% in 2020, while the Nasdaq soared 43%. 

British investor Jeremy Grantham said on Tuesday that the stock market is in a “fully-fledged epic bubble,” driven by extreme overvaluations, explosive price increases, frenzied issuance, and “hysterically speculative investor behavior.” 

Read more: Bank of America says the warning signs that stocks are hurtling into bubble territory are growing – and pinpoints 6 that could signal a bear market is beginning

Mohamed El-Erian said on Thursday the market is in a “rational bubble,” propped up by investors confident in the Fed’s continued support.

Despite bubble concerns, bullish sentiment for investors has climbed. 57% of the surveyed investors said they’re “bullish,” which is up 5 percentage points from last quarter’s survey. 

“Investors see that unprecedented fiscal stimulus, the Fed’s easy monetary policy, the vaccine rollout, and relatively healthy earnings are all positives for the market,” said Mike Loewengart, Managing Director of Investment Strategy at E*Trade Financial. “Yet at the same time there is awareness that some, if not all, of these factors may already be priced in, and market corrections are a matter of when, not if.”

The survey was conducted from Jan.1 to Jan. 7, 2021 among an online US sample of 904 self-directed active investors who manage at least $10,000 in an online brokerage account. 

Read more: The CIO of a $500 million crypto asset manager breaks down 5 ways of valuing bitcoin and deciding whether to own it after the digital asset breached $40,000 for the first time

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Most institutional investors say the market is underestimating COVID-19’s long-term impact on the economy, a Natixis survey finds

A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York
A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York.

  •  A new Natixis Investment Managers survey of  500 institutional investors found that 8 in 10 say the market is underestimating the pandemic’s long-term impact on the economy.
  • The results reveal a stark contrast to calls from more bullish voices, like Wharton’s Jeremy Siegel who says the economy and stock market will be stronger than expected in 2021.  
  • The survey also highlighted the sectors investors anticipate will outperform in 2021, and the areas they’re most concerned about heading into next year.
  • Visit Business Insider’s homepage for more stories.

Eight in 10 institutional investors say the market is underestimating the COVID-19 pandemic’s long-term impact on the economy, and 79% don’t expect a full economic recovery until 2022 or 2023.

That’s according to the recently released Institutional Investor Outlook survey from Natixis Investment Managers. The firm surveyed 500 institutional investors who collectively manage more than $13 trillion in assets in 29 countries. 

The survey results reveal a stark contrast to more bullish calls on the economy, like Wharton’s Jeremy Siegel who says the economy and stock market will be stronger than expected in 2021.  

The S&P 500 continues to break new records, but over three quarters of investors are wary of assuming that run will continue- 78% of institutional investors say current market growth is unsustainable, while 95% see the potential for a market correction in at least one sector. 

Read more:The equities chief at $1.4 trillion Franklin Templeton says stocks are ‘priced for perfection’ – but investors still shouldn’t wait to get in. He tells us 9 ways they can get the market-beating returns.

According to Natixis, investors are most concerned over a correction in real estate, technology, and cryptocurrency. 

However, technology and healthcare are two sectors investors expect to outperform in 2021. 66% expect technology to outperform in 2021, while 65% expect healthcare to exceed expectations. But investors anticipate more beaten-down sectors of the market, like real estate, financials, and industrials to continue to underperform.

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Stocks could stumble in early 2021 as investor sentiment surges past market fundamentals, Goldman Sachs says

NYSE Trader
Traders look on after trading was halted on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 18, 2020

  • Goldman Sachs’ Sentiment Indicator – which measures how far stock prices are outpacing fundamentals – climbed to two standard deviations above its average on Friday, signaling heightened risk of near-term market weakness.
  • Rising COVID-19 hospitalizations and weak economic data add to the odds of “a modest positioning driven pullback in the next month,” strategists led by Arjun Menon said in a note.
  • The bank still stuck with its forecast that the S&P 500 will rise 16% throughout 2021, hinging the forecast on expectations of widespread vaccine distribution.
  • Such stretched positioning historically led to market weakness over the next one to four weeks, Goldman said. Still, stock returns typically turned positive after two months, the team added.
  • Visit the Business Insider homepage for more stories.

Unusually optimistic investor sentiment endangers the stock market’s near-record levels heading into the new year, Goldman Sachs strategists said Monday.

Positioning in stocks is at “extremely stretched” levels as prices rally further beyond equities’ fundamentals, the team led by Arjun Menon said in a note to clients. The bank’s Sentiment Indicator – which tracks stock positioning among retail, institutional, and foreign investors – landed two standard deviations above average on Friday, representing a 98th percentile reading since 2009. The gauge last hit that level in September 2019, months before the coronavirus ended the US’s longest bull market in history.

Readings above one standard deviation “historically signaled stretched equity positioning,” the team said. Such positioning tends to present a headwind to short-term returns when economic growth is slowing or stable, they added.

“The recent surge in COVID hospitalizations and weaker-than-expected economic data therefore increase the risk of a modest positioning-driven pullback in the next month,” the Goldman strategists said.

Read more: Morgan Stanley’s consumer analysts share 13 high-conviction global stocks to buy to capitalize on the continuing economic recovery

Stocks are trading just off of record highs, most recently falling on concerns of a delayed stimulus package. Enthusiasm around President-elect Joe Biden’s victory and progress toward approving a coronavirus vaccine boosted outlooks on Wall Street through November and fueled a shift in investor capital from growth stocks to riskier value names.

The team still holds a largely bullish outlook toward 2021 market returns despite near-term risks. The bank doubled down on its call for the S&P 500 to hit 4,300 by the end of 2021, implying a 16.3% rally from current levels. Widespread vaccine distribution throughout next year will drive a V-shaped recovery, and any risks from stretched positioning will fade in a few months, the team said.

In prior instances when Goldman’s Sentiment Indicator landed two standard deviations above average, S&P 500 returns were weak in the next one to four weeks but almost always positive after two months, the bank added.

Even with equity allocations at their currently heightened levels, the strategists expect investors to continue pushing cash from money-market funds into the stock market. Cash yields are set to hold near zero for several years, and hopes for economic recovery will set stocks on an upward trajectory, the bank said.

Households and foreign investors are expected to be net buyers of US stocks throughout next year, with the former group poised to push $100 billion into the market. Mutual and pension funds will be net sellers, Goldman said.

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