Investors Avoid Risk Despite Record S&P 500 Rise
The US stock index S&P 500 has been showing a series of record gains lately, but signs of risk protection are growing in the market.
Investors refrain from risk amid the rapid spread of a new strain of coronavirus, Bloomberg writes. In particular, they sell off shares of airlines and cruise operators, giving preference to securities of companies that benefit from the introduction of restrictions.
Signs are emerging in the market, indicating that the S&P 500, which soared 90% from its low in the pandemic, could stall as fewer stocks are helping the next rally. In this regard, the demand for government bonds is actively growing.
“The market is starting to realize that all the good news can’t be that good,” Daniel Skelly, director of market research and strategy at Morgan Stanley Wealth Management, told Bloomberg.
The S&P 500 posted gains for the fifth week of six, closing above 4300 for the first time in history. Meanwhile, the Nasdaq 100, which includes tech companies, completed a 7-week rally in its longest rally since November 2019. Meanwhile, the stocks of companies sensitive to the situation in the economy fell short of the market dynamics, while the Russell 2000 index, which tracks the dynamics of smaller companies, declined.
The contrast between techs and small caps is yet another example of how investors adjust positions to anticipate more significant obstacles to stock market growth.
ETFs focused on US equities lost about $ 6 billion in the week to the end of last Thursday after raising more than $ 200 billion in the first few months of the year, data compiled by Bloomberg showed. The inflow of investments into the exchange-traded bond fund iShares 20+ Year Treasury Bond ETF became the second most significant in a month, amid demand for assets considered safe.
Hedge funds have also started to hold back from risks: they cut long positions in the last days of June. Their risk aversion activity has peaked since late January, according to data from Goldman Sachs Group Inc.
Despite the fears, there are still enough reasons to invest in stocks. Analysts still expect American companies to increase profits until at least the end of 2023. In addition, the rhetoric of the leadership of the US Federal Reserve System (FRS) has become more “hawkish,” but the regulator is still far from raising the key rate.
Experts from BlackRock Inc., State Street Global Markets, UBS Asset Management, and JPMorgan asset Management expect global equity markets to continue to rise in the second half of 2021, while many investors are increasingly looking outside the United States search of lucrative investments.
