Welcome to the schizo world of market prognostications.
A buoyant June for the stock market has rekindled optimism in parts of Wall Street for the rest of the year, following May’s slump, which may or may not turn out to be an aberration in the bull market.
But the enthusiasm is far from universal. A poll of money managers was much more pessimistic and outflows from equities continue.
Credit Suisse rejoined the bullish side this week, after dumping its overweight recommendation for stocks two weeks before. “On balance, we think there is more risk of a ‘melt-up’ than a meltdown, and find that we are more positive than most of the clients we meet,” the firm said in a research note.
Inspired by the prospect of a Federal Reserve rate cut and expecting earnings to do better up ahead, Credit Suisse projected a 6% further increase in the MSCI All Country World Index by year-end. Year-to-date, the index is up 13.2%.
Meanwhile, equity allocations of money managers showed the second-biggest drop on record this month, a Bank of America Merrill Lynch survey stated, with cash holdings rising the most since the 2011 federal debt ceiling clash in Washington. This comes after an unexpected spike in US unemployment filings, a five-week high.
Half of the managers surveyed said they expected weakness over the next 12 months.
As for BofA itself, the financial giant’s strategists depict the exodus from stocks as a contrarian bullish signal. For one thing, it said in its own note, US consumers are unaffected by the trade war. Plus central banks worldwide are looking at ways to bolster their economies with easier money.