Home ›› 23 Aug 2021 ›› Stock
Investors are preparing for a rockier ride ahead for markets, as worries over slowing growth, a looming rollback of the Federal Reserve’s easy money policies and a global Covid-19 resurgence threaten a rally that has seen the S&P 500 double from last year’s lows.
Signs of caution abound, even as US stocks hover near record highs. Goldman Sachs economists recently lowered their tracking estimate of US economic growth in the third quarter to 5.5per cent from 9per cent due to the impact of the Delta variant, while fund managers surveyed by BofA Global Research said they boosted cash overweights to the highest level since October 2020 while adding to positions in defensive sectors such as healthcare and utilities.
Worries over slowing growth in China and other major economies have hit prices for oil, copper and other raw materials while the US dollar, a key destination for nervous investors, stands at its highest level in nearly nine months against a basket of currencies.
Even retail investors, a group that has supported rallies in everything from tech stocks to crypto over the past year, appear to be cooling their heels. Online brokerage Robinhood, the gateway for many retail investors into so-called meme stocks, said Wednesday its clients are likely to slow their trading in coming months.
Past warnings of a coming pullback have so far failed to play out this year, and cutting exposure to stocks has been a losing strategy during the market’s run from its 2020 lows, reinforcing the idea that there are few assets where investors have been able to notch the type of returns seen in equities. Still, the looming risks have bolstered the view that markets may be more turbulent in the months ahead.
"We have gotten past that euphoria-type of rally where everything, all asset classes and all stocks, continued to rally," said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors, which oversees about $3 billion in assets. Now “you have to be a bit more selective.”
