A new poll of big money managers reveals that a high percentage of them are bullish. The latest Barron’s Big Money Poll, known as the “Spring edition,” surveyed nearly 120 investment professionals nationwide. Despite challenges like high bond yields, inflation concerns, unrest in the Middle East, and an upcoming U.S. presidential election, most money managers are optimistic that U.S. equities will continue to climb.
Here is what was learned about the manager’s optimism and expectations.
Market Optimism Despite Short-Term Hiccups
The stock market hit a bump in the road in April after a solid first quarter. Optimistically, many money managers view this as a healthy correction after a strong first quarter, so they anticipate further gains.
Over half (52%) of those surveyed by Barron‘s said they were bullish on the stock market for the next year. This is a significant increase from the 38% that were optimistic last fall.
Reasons for Bullishness
One reason for the bullishness among professional investors is that they tend to take a long-term view beyond short-term fluctuations. This longer focus on the overall trajectory of the market and the economy looks past what may just be small problems. This perspective leads them to see current challenges as temporary bumps. With this, the weakness in April is viewed as an opportunity. In fact, big money managers see this as a more attractive entry point to accumulate shares in undervalued companies with strong fundamentals.
Another reason provided for the bullish sentiment is confidence in the U.S., particularly in the continued profitability and growth potential of American companies. This perspective is part of what is fueling bullish sentiment and bolstering the optimistic outlook.
What the Bulls Predict
Over half of the bullish managers anticipate that the Dow Jones (DJIA) will increase by another 9% before year-end to close the year at approximately 41,231. As for the S&P 500 (SPX), they expect an additional 9% gain, closing the year at 5,461. They are also optimistic about the Nasdaq 100 (NDX), anticipating that it will return another 10%, reaching 17,143.
The Bearish Perspective
The bears had a weak showing in the polls, as only 15% of respondents were bearish (33% were neutral). The group, on average, also had their own perspective and reasons for remaining cautious for the rest of the year.
To begin with, the bears view valuations at these levels as high, leading them to believe that the likelihood of further gains is significantly reduced at this point.
Money managers are also concerned about stubbornly high inflation, which could encourage the Federal Reserve to maintain higher interest rates for longer and potentially hinder economic growth.
Further, global unrest, from the Ukraine war to the armed tensions in the Middle East, and even issues in countries like China and Thailand, are all viewed as posing threats to the market’s ability to maintain its current level.
Views Small Investors May Use
Big money managers are urging investors to be more discerning. Investors are being advised to refrain from chasing overheated stocks, Instead, they should look for undervalued opportunities with solid fundamentals.
This cautious approach is evident in the bear’s view of high-flying tech stocks. Chip giant Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) are seen as particularly overvalued, trading at multiples of earnings that some money managers find unsustainable.
Sean Sebold, president of Sebold Capital Management, highlighted the disconnect between Nvidia’s recent stock price surge and its future earnings potential. While he acknowledges the company’s strong fundamentals, he believes the current valuation is unrealistic.
These advisors recommend a shift in focus towards undervalued stocks.
Key Takeaways
The newly released poll of top money managers reveals that a significant majority of professionals hold bullish opinions about the market rather than bearish ones.
But the managers, no matter whether they are bullish, bearish, or neutral, generally agree that success in the market cannot be achieved simply by chance. They advise investors to refrain from chasing overheated stocks and look for stocks with solid fundamentals.
