It’s a bubble, according to a survey of private equity investors. And they don’t want to miss it.
An E * Trade Financial poll found that about three-quarters of retail investors believe the market is “fully or somewhat” in a bubble, up 3 percentage points from the previous quarterly poll. At the same time, bullish sentiment has risen and has risen to a pre-pandemic level of 61%.
“Optimism has grown as the market hit new all-time highs, vaccines increased, stimulus measures continued and earnings expectations are high,” said Mike Loewengart, director of investment strategy at the company.
Stocks have been gaining momentum for over a year and bubble alerts have been ringing for most of that time. But the latest step up has lifted valuations to levels last seen in the dot-com era, and with soaring returns, the chorus has grown so loudly that retail investors have taken notice. But most ignore it – just as they did when the S&P 500 rose 83% from its pandemic lows – betting there is money to be made as long as government spending and the Federal Reserve keep policy loose.
They have been consistent when bought the pros jumped away, making early bets on stocks that will benefit the most from a return to normal economic activity. According to data from VandaTrack, they’ve plowed an average of $ 1.2 billion a day into stocks for the past 12 months.
Source: E * Trade Financial
In some quarters, the relentless purchase by individual investors raises concerns that the group is on the verge of withdrawal, posing risk to the broader market. According to an estimate by JPMorgan Chase & Co. US household equity allocation is likely to have risen to 40% in April, ahead of the dot-com peak and its highest level since the early 1950s.
At various times over the past year, the shopping frenzy has sparked concern among professional investors who warned that, as in the early 2000s, their involvement meant too much euphoria. But they haven’t shied away yet. At Bank of America Corp. individuals were net buyers of stock for a sixth consecutive week, according to the company’s latest data on client funds. This contrasts with professional investors who took advantage of recent profits to offload holdings.
E * Trade surveyed nearly 1,000 retail investors who manage at least $ 10,000 in their online brokerage accounts. The survey also found that nearly half believe the economy is in better shape, up 15 percentage points from the previous quarter’s results. And while concerns about virus-related risks declined during the recent vaccine rollouts, concerns about market volatility have increased and are now considered the greatest risk to investor portfolios, according to the survey.
According to Max Gokhman, head of asset allocation at Pacific Life Fund, what happens when there is a significant downturn depends on whether or not retail investors continue to play a major role in the markets. Advisors
“What if there is no new fuel for this rocket ship to the moon? Many people with diamond hands may realize they have paid too much for shoddy cubic zirconia, ”he said, referring to a popular phrase that bullish gumption. “Whether they stay on the market after that will determine the long-term effect of the retail industry.”