To some, the fanatic buying in and of itself is a sign of caution—sentiment has become stretched, making the market vulnerable to negative shocks. At Bank of America Corp., the latest survey of money managers showed cash levels have fallen below the 4% threshold, triggering a sell signal.
Over at Citigroup Inc., chief U.S. equity strategist Tobias Levkovich counted four potential catalysts that could pose dangers for the market in the second half of the year—the Fed’s discussion about rolling back its monetary stimulus, corporate tax hikes, inflation fears and the pressure on profit margins.
“We maintain a cautious view over the next several months,” Levkovich wrote in a note to clients, sticking to his year-end target of 4,000, which is 5% below the S&P 500’s last closing. “Sentiment remains ebullient, valuation is not attractive and the Street already expects strong profit trends.”
Still, Levkovich advised investors to buy on dips partly because corporate repurchases are set to accelerate. Buttressed by a rebound in profits and near-record cash hoarding, announced buybacks have more than doubled this year to $570 billion, data compiled by Birinyi Associates show.
While retail interest in stocks, particularly meme names, will subside eventually, right now it’s too risky to go against the crowd, according to Michael Holland, chairman at Holland & Co.
“The reality is that all these things do go away, you just don’t know how long they take to go away,” Holland said in a Bloomberg Television interview. “I wouldn’t be real fast to get out of cash position and start shorting stocks.
This article was provided by Bloomberg News.