With the economy opening up after over a year of lockdowns, the hi-tech stocks that boomed as the world went virtual are in retreat.
Today, the markets reversed sharper losses with the Dow up 19.80 points, the NASDAQ down 1.88 percent, and the S&P 500 off 0.67 percent.
Have the markets peaked?
In the week ending 28 April, investors took $57.3 billion from stock markets and set it aside in cash, according to data from EPFR, the greatest weekly withdrawal since March 2020 when the pandemic struck.
During the same week, about $10.5 billion flowed into equity funds, a significantly smaller amount than in the previous week and a fraction of the record $58 billion that went into stock funds in one week in February.
The shifts highlight investors’ newfound caution, analysts say: a growing number of players wonder if the market is overvalued and doubt that its recent momentum can continue.
Also, rising prices may dent corporate sales and profits, especially with consumers eagerly spending President Biden’s $1.9 trillion in new stimulus money.
In addition, investors are leery of Biden’s plan to hike capital gains taxes, which would make stocks less attractive, especially for the wealthiest investors who own most of the stocks, market watchers point out.
“Cash is the natural stopgap when you’re reassessing your investment framework,” Bank of America strategist David Jones said to the Financial Times. “We are also repositioning for higher taxes” as well as “inflation and tapering” of the U.S. Federal Reserve’s bond-buying spree.
First-quarter earnings are averaging 51 percent above the same period last year among the more than 300 companies that have posted results so far. The S&P 500 index closed above 4,200 on 30 April to set a new record.
TREND FORECAST: The reality hitting The Street is that they had a long, hot bull run and now, with fears of higher taxes and higher interest rates, the markets are running out of steam.
Thus, we maintain our forecast for a sharp correction in the coming months and bear market before the year’s end.
