Wall Street Week – Full Show (03/26/2021)
Two-thirds of professional investors doubt the stock market‘s jump from March lows is the start of a new bullish trend, according to Bank of America’s May Survey.
Against the background of the rise, which led to the growth of S&P 500 at 32% since the failure on March 23, about 68% of respondents named the existing movement «bear market». The term implies that while growth has exceeded the 20 percent target that would signal a new bull market, fundamentals suggest a more pessimistic story. Bank of America survey is one of the most popular investor surveys on Wall Street.
Investors are rethinking strategies after the longest bull market in history suddenly ended after a late February peak. Wall Street’s plunge over the next month was the fastest slide into bear market territory as the global economic downturn forced investors to sell everything and prepare for the worst..
Since then, the Fed and other central banks have launched cash injections, joined by the US Congress, which has already pledged nearly $ 3 trillion to fund the bailout program. Stocks rally even more, despite uncertainty over the spread of the virus and its impact on future growth.
Respondents believe that the biggest catalyst for V-shaped recovery will be the vaccine; conversely, they see that the greatest risk could be the second wave of the pandemic, which will come in the fall.
Investors see the stock price as the worst rate in the current environment. 23% of this group expect to surpass their peers in height, the lowest level since December 2007.
Sectoral rates are now in favor of defensive assets such as health care, cash and bonds, and against more cyclical investments such as energy, stocks in general, and European assets. Cash levels are at 5.7% in portfolios, up from a recent high of 5.9%, but still considered elevated.
Views on what companies should do with their own cash reflects changing market relationships: 73% of respondents said they need to focus on improving balance sheets and paying off debt, while only 15% approved capital expenditures and 7% said, what needs to be met by shareholders through the repurchase of shares and the payment of dividends.
Managers are also seeing significant shifts in the corporate segment. In their opinion, the most likely «structural shift», constituting 68%, there will be a concentration on the production of goods closer to home, followed by trade protectionism (44%), higher taxes (42%) and the use of modern monetary theory (24%), which says that government debt it doesn’t matter if inflation stays low while government spending should be focused on programs aimed at reducing income inequality.