The US stock market seems to be gaining steam – the Dow Jones industrial average today is inching toward 25,000 after sinking to around 22,000 around Christmas time.
To put that in context, the Dow Jones is now in the median between all-time highs and one year lows.
A lot of that growth has happened in the last few weeks – but according to some experts, that doesn’t mean that the market fundamentals are strong.
They’re waiting for a “correction” that will decisively rock the financial world, signaling a greater recession
Investors are also looking at a full slate of real market-influencing issues that seem to be counted out of current swings, including but not limited to: U.S./China trade tensions, Fed Reserve interest rate speculations, and last but certainly not least, an ongoing government shutdown where 800,000 US federal workers are going without paychecks.
CNBC’s Eric Rosenbaum this weekend cites a recent survey by E-Trade that shows high net worth American investors are hunkering down despite index rallies and going into “preservation mode.”
“Although January has gotten off to a strong start for the stock market, there’s not a lot of confidence the market bottom has been reached, according to a survey of wealthy investors conducted this month by E-Trade Financial and provided exclusively to CNBC,” Rosenbaum writes. “Recent trading patterns have contributed to renewed market optimism with headlines that the U.S. and China are moving closer to resolving their trade differences. DJIA finished with a gain of 336 points on Friday, and is up over 13 percent since Christmas Eve, posting its first four-week winning streak since August. Yet despite the rally, there have been big increases in bearishness among investors with at least $1 million in a self-directed brokerage account.”
Rosenbaum suggests investors are moving now to “defensive moves” even more so than they were in Q4 of 2018, when the indices were tanking.
“When last surveyed by E-Trade, these investors were dealing with heightened November volatility, though nowhere near the extreme dive that was yet to occur in December,” he writes. “At that time, 62 percent of these investors remained bullish. In the January survey, that fell to 44 percent, with a majority 56 percent describing themselves as bearish when it comes to the current market. Only 45 percent of these investors believe the market will rise this quarter.”
That’s not great news for day traders who are in on this rally, but it is actionable news for investors who have to decide how to manage their portfolios. From Alan Greenspan to other top experts, investors have ample input suggesting it’s time to dial back risk.