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Investors believe it’s time to get very conservative in the stock market, CNBC survey shows


A trader works on the floor of the New York Stock Exchange (NYSE) in New York, on Monday, Sept. 20, 2021.

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Wall Street investors believe it’s time to take some risk off the table as concerns continue to pile up this month, according to a new CNBC Delivering Alpha survey. 

About 400 CIOs, equity strategists and portfolio managers were surveyed by CNBC to find out their views on markets in 2021 and beyond. This week’s survey was completed.

When asked about the market risks they would accept, more than three quarters said that now was a good time to be cautious in stock markets.

A confluence of uncertainties have emerged in the market, threatening to derail stocks’ record-setting recovery rally. On Monday, the S&P 500 suffered its worst sell-off since May as investors grew concerned about China’s troubling real estate sector and the Federal Reserve’s likely rollback of its massive stimulus. Meanwhile, fears of slowing economic growth amid high inflation — so-called stagflation — have also crept back nearly two years since the pandemic began.

Investors still have a cautious outlook on the stock market, but they believe that stocks will rise over the next twelve months. About half of the survey respondents said the S&P 500 will rise more than 5% in the next 12 months. Fourty-four per cent said the equity benchmark will remain relatively flat. Only 5% claimed it would fall in the next one year.

After this week’s pullback, the S&P 500 is about 4.2% off its record high from early September. Following eight consecutive months with gains, the benchmark is currently up around 16%. Many think the market has suffered from seasonal weakness during a historically turbulent month of September.

Brian Price, chief investment manager at Commonwealth Financial Network said that there has been a shift in sentiment towards the bears over the last few weeks. It seems that after a slow summer when the path of least resistance was increasing steadily, market participants may be looking to diminish this year’s rally.

Notable strategists remain bullish on the market. Widely followed Tom Lee of Fundstrat believes The Monday stock market crash is an opportunity to purchase. JPMorgan’s quant guru Marko Kolanovic also called the sell-off overdone.

However, Morgan Stanley’s Mike Wilson, one of the biggest bears on Wall Street, sees a “destructive” scenario where the S&P 500 suffers a 20% correction as some economic indicators have started to deteriorate.

The survey results show that private credit is currently the best option for those investors looking to focus on yield. Only 2% believed that Treasurys would offer an attractive source of income.

Government bonds are quickly becoming one of the most hated asset classes as their safe-haven appeal dampened amid the economic recovery. In the meantime, Fed could soon begin to taper its QE program. The Fed has bought $120 Billion in Treasurys as well as mortgage-backed securities via its quantitative-easing program.

One-time bond king Bill Gross recently called Treasurys trash, saying the 10-year yield will trade around 2% for the next 12 months. Leon Cooperman last week said bonds are “totally overpriced,” calling a big decline in prices.

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