Wild price swings are already a signature feature of 2022’s stock market. The S&P 500 has swung at least 1% during 86% of the trading sessions, on course for the wildest year since 2009, data compiled by Strategas Securities show.
That, along with persistent losses, seems to be finally taking a toll on sentiment. Investors, who went bargain hunting during the first quarter are fleeing stocks at the fastest pace since at least 2015. Almost $26 billion has been pulled out of equity-focused exchange-traded funds this month, according to data compiled by Bloomberg.
While some of the outflows from ETFs including Vanguard S&P 500 ETF (ticker VOO) and iShares Core S&P 500 ETF (IVV) may be tax-driven, sentiment may be the reason behind outflows in Financial Select Sector SPDR Fund (XLF) and iShares Russell 2000 ETF (IWM), according to Bloomberg Intelligence’s Eric Balchunas.
Not everyone is giving up on the time-tested dip-buying strategy. JPMorgan Chase & Co.’s Marko Kolanovic, one of the staunchest bulls among Wall Street strategists, on Monday urged clients to add stock holdings, saying the market is likely to rally in the coming days, reversing losses from the previous week.
As rewarding as it looked since the pandemic bottom in 2020, when stocks embarked on a staggering 99% rally over two years, bottoming fishing is getting risky. After a brief respite earlier this month, stocks resumed their carnage, with the S&P 500 approaching its low for the year and the Nasdaq 100 back to where it was in May 2021.
While it is likely bulls will eventually reap gains in the long run, the market’s inability to stem the bleeding can be nerve wracking. All year, investors have been battered by prolonged declines, with the S&P 500 posting four separate stretches where it fell at least four days in a row -- a rate that if sustained would make this year the worst for bottom feeders since 1984.
“Undoubtedly the feel of the market has turned. This is an equity market where it is more profitable to sell into strength,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “We expect this bear market to remain in place through Q2 and, only if the inflation risks have shown material signs of having peaked, can this turn into a slight risk rally in H2.”
-With assistance from Global Data’s Anwesha Patnaik.
This article was provided by Bloomberg News.