After sizzling rebound, investors weigh whether stocks have more bounce

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Following a months-long drubbing, the S&P 500 delivered its best weekly gain since November 2020

as investors cheered increased clarity on monetary policy and an encouraging assessment of the U.S. economy from the Fed. The surge cut the index’s year-to-date losses by nearly half, though it is still down 6.7% for 2022 after falling into a correction last month.

Still, some big banks believe the worst may be over, for now. Strategists at UBS Global Wealth Management on Friday said the projected pace of Fed tightening is “consistent with rising stocks” and advised clients to remain invested in equities. Stubborn inflation, sky-high commodity prices and few signs of an end to the war in Ukraine further cloud the picture for investors, said Rick Meckler, a partner at Cherry Lane Investments.

Fund managers’ allocation to cash stand at their highest levels since April 2020, according to BofA Global Research’s monthly survey. Bearish sentiment among retail investors is close to 50%, the latest survey from the American Association of Individual Investors showed, well above the historic average of 30.5%.

Cresset Capital Management is recommending that clients underweight equities and raise their exposure to gold, which is viewed as a safe-haven asset, said Jack Ablin, Cresset’s chief investment officer.

 

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