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Barron's Big Money Survey is out this morning! It's part of my investing process twice a year (April and October) in how I gather information about positioning and sentiment. It was one of the major reasons why in October I went super long energy and financials. Some takeaways:
Very few are bearish equities over the next 12 months on the survey. I interpret this not that the end of market cycle is nigh, but rather that very few are expecting a large pullback (I define that as a pullback of >15%):
Most view stocks as fairly valued. 40% view them as overvalued. 5% view them as undervalued. 2/3 of those that think stocks are overvalued view them as >10% overvalued.
What returns will US return on average per year over the next decade? Personally I'm in the 1-5% camp. I think it'll be a choppier decade of returns, similar to the 60s.
Most clients of the respondents are neutral towards equities with very few bears. I view this as a risk for markets over the next 6 months, but won't be a cycle ending event.
Rising interest rates are viewed as the biggest risk for markets, with Excessive Stock Valuations viewed as the least likely to cause a headwind for stocks.
Most will lower their allocation to equities and raise their allocation to bonds in 12 months. IMO that should be reversed as there will be a large dip to buy in 2H of the year.
Equities are at the top of the list as most attractive asset while Cash/Bonds/Gold are low on the list. Those three will outperform stocks over the next 6 months IMO.
Emerging Markets overtake the US as favorite equity market for the next year. Japan last on the list.
Value is the overwhelming favorite over Growth for the next 12 months. Almost 75% think it will outperform.
Banks, Tech, and Energy are viewed as the top 3 sectors to own for the next 12 months (it was Tech, Healthcare, and Industrials back in October). My view is rates pull back, bonds rally, and banks get a large pullback in the 2H of the year. Materials bottom of the list.
Utilities viewed as the worst sector to own over the next 12 months. They should do extremely well in 2H of the year with the washed out sentiment if rates and stocks both pull back.
This is the list of 8 stocks that the respondents viewed as their favorites for the next 12 months. My 3 favorites on the list are $FB $FCX and $GE.
These 5 stocks are the most overvalued in the respondents opinion. If I had to pick two on the list here for a guess to own long, it'd be $GME (so obviously overvalued it just might take another huge leg up) and $FB.
When will the Fed raise their target interest rate? My view is somewhere in the green window:
What will the ten year treasury rate $TNX trade at in a year? Only 13% of respondents think that it will be <2%. This reminds me of the prior survey in October when only 12% thought we would be >1.5%. I think it'll take longer to breach 2% than most think.
90% of the respondents are concerned with the Federal Debt level. My guess is this won't be an issue for markets until fears subside.
