Posthaste: More than a quarter of global investors expect a 15% market correction over next six months - Financial Post

The S&P/TSX Composite Index closed yesterday at a new high of 20,157.65 points, while the S&P 500 and Nasdaq indices also closed at record highs. For many investors that’s a signal that the markets may need to pullback after an impressive rally.

As many as 47 per cent of investors surveyed by the Bank of America expect a correction of as much as 10 per cent; another 29 per cent believe the market could fall as much as 15 per cent. While 6 per cent expect just under a 20 per cent correction, only 2 per cent believe we are going to be in a bear market territory in the next six months.

The BofA survey of more than 180 chief investment officers, strategists and portfolio managers, noted that investors remained bullishly positioned for permanent growth, and were long on commodities, cyclicals and financials as they expected a peaceful U.S. Federal Reserve taper.

The U.S. Federal Open Market Committee starts its two-day meeting today. The survey shows that 38 per cent expect the Fed to signal tapering at the Jackson Hole summit at the end of August, while a quarter believe it could be during the FOMC meeting in September.

“Nobody believed that rates at 1.5 per cent would cause an equity correction. But the move from 1.5 per cent to 2 per cent is critical as a large majority of investors now think rates over 2 per cent would be detrimental for stocks,” Bank of America noted.

Other key survey findings:

• 72 per cent of fund managers believe inflation is transitory
• 81 per cent of investors still think Bitcoin is a bubble despite the price pullback
• Tech stocks are back in favour with investors raising their exposure to the sector in the past month
• Investors, however, were divided on which stocks will fare better over the next four years: 24 per cent thought value stocks would perform better, while 23 per cent felt that way about tech stocks
• Among BofA clients, bonds net percentage asset allocation is at a 3-year low to -69 per cent
• Inflation/bond tantrums has replaced coronavirus as the biggest tail risk in the eyes of investors
• Investors believe “long commodities” is the most crowded trade, while 21 per cent feel that way about “long bitcoin.”

Adblock test (Why?)

Posthaste: More than a quarter of global investors expect a 15% market correction over next six months - Financial Post
Read More