Large investors still say they aren’t ready to sell as coronavirus crisis continues

Investors grew increasingly concerned about the U.S. economy and the stock market as March wore on, but they also said they aren’t ready to abandon their stocks, according to several surveys.

The vast majority of the institutional clients surveyed by Citi expect an economic downturn and earnings estimates to be cut further in 2020, but they are more bullish on equities. About 70% of institutional clients think that a 20% climb for stocks is more likely than another 20% tumble. 

“Intriguingly, despite recession fears, 80% want to commit new cash to equities, but greater than 85% see large caps as outperforming and 65%+ perceive growth stocks to outpace value names,” Citi said in a note.

The median chunk of the portfolios that these investors are holding in cash is 10%, Citi said, higher than in late 2008. 

Those investors bringing their cash off the sidelines would provided a much needed boost for rattled markets. The major stock indexes are finishing March in bear market territory after hitting record highs in mid-February, as the coronavirus pandemic has ground major parts of the global economy to a halt and sparked record high unemployment claims in the U.S.

UBS survey of high-net-worth investors, conducted between March 21 and March 24, showed a similar reserved confidence. 

The majority had a negative outlook for the S&P 500, but only 24% said that they did not see investment opportunities. Thirty-four percent said it was time to buy and another 42% said they were waiting for another pullback before buying in. 

“They’re clearly pessimistic about the short-term, whether it’s the stock market or the economy, however, they’ve got a long-term view that is optimistic on the economy,” Tom Naratil, UBS Americas president, said on “Closing Bell.” 

Overall, 69% of the investors expect a recession in the next 12 months, but just 11% plan to decrease investments. About 46% of the investors surveyed expected the coronavirus crisis to be over by late June, a six-percentage-point decline from a similar survey earlier in March.

To be sure, some view positive sentiment by investors during a downturn as a sign that there is still a final round of panic selling needed to find a bottom. Citi said in the note that its “Panic/Euphoria Model has just gone to the border of despair but has not crossed it yet.”

A poll from Wells Fargo and Gallup, conducted from March 17 to March 19, showed that many investors had not felt the need to call the professionals despite stocks falling 30% from all-time highs in record time, saying they felt confident they could weather the downturn.

Just 20% of investors with investments worth more than $100,000 said they had contacted a financial advisor during the recent downturn. Among those with less valuable stakes, just 7% contacted an advisor. 

Even those who did contact an advisor said they were more likely to buy or hold stocks than to sell. Overall, Only 4% of investors in the Gallup poll say now is a time to sell stocks to protect your value, with little variation among different age groups. 

Leave a Reply

Back to top