NEW YORK, Aug 1 — Investors are preparing their portfolios for a potentially rocky patch in US stocks, worried that a dramatic rebound in equities may stall amid dimming economic data and rising political uncertainty. Most money managers are wary of cutting equity exposure too drastically in a...
Most money managers are wary of cutting equity exposure too drastically in a market that has rallied more than 40 per cent since late March and stands near all-time highs despite widespread economic devastation and a global coronavirus pandemic. — Reuters pic
Still, the continued divergence between stocks and the real economy has worried some investors. US growth took its worst hit on record in the second quarter, while more recent data points to fading consumer confidence and jobless claims back on the rise. The S&P 500, meanwhile, stands some 4 per cent below all-time highs, though its weekly advances have grown progressively smaller in July.
“The longer persists, the more permanent the structural damage becomes,” said Michael Hans, chief investment officer at Clarfield Citizens Private Wealth in Tarrytown, New York. “For the moment, a range-bound scenario makes sense.” Market participants hope the Labor Department’s July payrolls report, due next Friday, will shed more light on the state of the recovery.
“Normally the safe-haven money would be on the fixed-income side, but having some cash for a while seems to be prudent to me,” he said. “As the S&P has been rallying, we’ve been reducing our exposure to domestic stocks,” Kirby said. “Europe is looking increasingly resilient.”Choppy trading in US stocks has helped keep the Cboe Volatility Index above its long-term average even though shares overall have moved minimally, strategists say.
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