Retail sales and more debt-ceiling talks are the big spotlight for Tuesday, with stock futures indicating some wobbling ahead. There was also some disappointing China data that showed a slowing recovery.
Dipping a toe into how investors are feeling these days is the latest fund manager survey from Bank of America. Strategist Michael Hartnett and team reveal that investor sentiment deteriorated in May to “the most bearish of 2023” as investors lifted cash balances and got a little more negative on growth. They say that is good news — “positioning still contrarian [positive] for Wall Street.”
Worried managers are convinced that risk assets will remain “resilient so long as the [economic] landing is soft.” The below BofA chart shows nearly two-thirds of those surveyed — 63% — see a soft landing as the most likely outcome for the global economy.
And 61% are convinced the Fed has finished hiking, while 43% say perhaps not.
The next chart might explain why the market is taking that Alfred E. Neuman approach to debt-ceiling talks, baffling some on Wall Street, as 71% expect the ceiling will be raised by the so-called X date:
So where are the worries in this teflon market? A bank credit crunch and a global recession are at the top, followed by high inflation that keeps central banks hawkish.
if there is a credit event, most of those surveyed think it will start in the commercial real estate corner.
As for where this market is looking crowded — the past month saw a big rotation out of commodities linked to those growth worries — and into stocks. The emphasis was on tech names, with an overweight that’s the highest since December 2021, alongside a move into eurozone stocks. Investors are most long on growth versus value stocks since July 2020.
No doubt, some out there have been questioning whether technology stocks can keep up the pace — the Nasdaq Composite COMP,
For those contrarians out there, the trades would be bullish positions on real estate investment trusts, banks and value stocks, and going the opposite way of the crowd by shorting bonds, technology and growth.
Read: Why stock-market bulls must beware of ‘bogus bear-market bottoms’
Stock futures ES00,
Read: A potential U.S. debt-ceiling suspension may present an upside risk for dollar, says BNP Paribas
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Starting this week’s retail earnings, Home Depot HD,
On that theme, April retail sales are due at 8:30 a.m., industrial production at 9:15 a.m. and business inventories and a home-builder confidence index will come at 10 a.m.
Blue Apron stock APRN,
Horizon Therapeutics HZNP,
First-quarter holdings from hedge fund managers and other big investors rolled out late Monday. Capital One shares COF,
Filings also showed Soros Fund Management sold its entire Tesla stake, as well as heavily trimming Rivian RIVN,
Bill Ackman’s Pershing Square took a new Alphabet GOOGL,
President Joe Biden will meet with House Speaker Kevin McCarthy and other U.S. lawmakers to discuss the debt-ceiling crisis in a meeting scheduled for 3 p.m.
And we’ll hear from a bunch of Fed folks throughout the day: Fed Vice Chair for Supervision Michael Barr will testify on Capitol Hill, then speeches from Richmond Fed President Thomas Barkin and New York Fed President John Williams, as well a TV appearance by Chicago Fed President Austan Goolsbee, who will later take part in a panel discussion with Atlanta Fed Pres. Raphael Bostic.
Russia has launched a heavy attack on Ukraine capital Kyiv on Tuesday.
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