CNBC survey shows investors think it’s time to be too conservative in the stock market

CNBC survey shows investors think it's time to be too conservative in the stock market

A trader works on the floor of the New York Stock Exchange (NYSE) on Monday, September 20, 2021 in New York City.

Michael Nagle | Bloomberg | Getty Images

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Wall Street investors believe it’s time to take some risks as concerns persist this month, according to a new CNBC Delivering Alpha survey.

We surveyed nearly 400 investment managers, equity strategists, portfolio managers and CNBC contributors who are managing money on their market position for 2021 and next year. This survey was carried out this week.

More than three-quarters of those surveyed said now is the time to be extra careful in the stock market when asked what kind of market risk they are willing to accept for themselves and their clients.

A confluence of uncertainties has arisen in the market, threatening to derail the record stock market rally. On Monday, the S&P 500 suffered its worst sell-off since May, with investors worried about a possible pullback in the struggling Chinese real estate sector and the massive Federal Reserve stimulus. Meanwhile, fears of slowing economic growth amid high inflation – so-called stagflation – have also returned almost two years after the start of the pandemic.

Taking a more cautious view of the market right now, investors believe stocks could rebound in the next 12 months. Almost half of those polled said the S&P 500 would rise more than 5% over the next 12 months. Forty percent said the equity benchmark would be fairly stable, while only 5% said it would drop next year.

After this week’s pullback, the S&P 500 is down about 4.2% from its all-time high since early September. The benchmark is still up about 16% this year after eight straight months of gains. Many believe the market is experiencing seasonal weakness during the historically volatile September.

“There has been a shift in market sentiment over the past few weeks which is in the bears’ favor,” said Brian Price, head of investment management at Commonwealth Financial Network. “After a relatively cool summer where the path of least resistance for equities was still high, it appears market participants view this year’s rally as lackluster.”

Some notable strategists are sticking to their bullish call in the market. Widely followed Tom Lee of Fundstrat believes the stock market shot on Monday is a buying opportunity for investors. JP Morgan’s quantitative guru Marko Kolanovic also called the sale excessive.

However, Morgan Stanley’s Mike Wilson, one of Wall Street’s biggest bears, sees a “doom and gloom” scenario where the S&P 500 recovers 20% as some economic indicators start to deteriorate.

According to the survey results, for yield-oriented investors, the best strategy today is private lending. Only 2% of respondents believe that treasury bills can provide attractive income.

Government bonds are fast becoming one of the most hated asset classes, as their appeal as a safe haven has weakened amid the economic recovery. Meanwhile, the Fed, which is buying $ 120 billion worth of treasury and mortgage-backed securities as part of its quantitative easing program, may soon begin its downsizing process.

Former bond king Bill Gross recently called the Treasury trash, saying the 10-year yield would trade around 2% over the next 12 months. Leon Cooperman said last week that the bonds were “absolutely overvalued”, calling the price drop sharply.

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