Bulls in the US stock market need to be cautious! According to a survey by MLIV Pulse, betting on an early interest rate cut by the Federal Reserve is considered the "most foolish" trade.
According to the given news information, this information belongs to investment research. According to the survey results, two-thirds of the respondents believe that betting on the Federal Reserve's early easing of monetary policy is the "most foolish" trade. Although the S&P 500 index closed at a historic high last week, investors are in a battle with data showing the resilience of the U.S. economy and Federal Reserve officials who oppose premature rate cuts. Wall Street's anxiety over excessive bullish bets on Fed rate cuts is growing. Traders have reduced the number of rate cuts to five and have begun to cut back on bets that the Fed will start a monetary easing cycle in March. Investors are less optimistic about stocks than they were in November last year, but still prefer stocks over bonds. The stock market is dominated by bulls, but respondents have a lukewarm attitude towards Bitcoin.
Zhitong App has learned that investors who heavily bet on interest rate cuts have suffered another blow: according to the latest Markets Live Pulse (MLIV Pulse) survey, two-thirds of respondents believe that betting on the Federal Reserve's early easing of monetary policy is "the most foolish" move.
Despite the S&P 500 index closing at a historic high last Friday, fund managers and analysts are engaged in a battle with data showing the resilience of the US economy and Federal Reserve officials who oppose premature interest rate cuts.
Betting on the Federal Reserve's early rate cuts is the "most foolish" trade
The survey results indicate that Wall Street's anxiety over excessive bullish bets on Federal Reserve rate cuts is growing. Traders were optimistic at the end of 2023, predicting that the Federal Reserve would cut interest rates six times this year, but now they have revised the number down to five. Compared to the sharp rebound in the stock market at the end of 2023, traders have also started to reduce their bets on the Federal Reserve's launch of a monetary easing cycle in March.
Janet Mui, Head of Market Analysis at Brewin Dolphin in Canada, believes that the accelerating inflation in some major economies and the resilience of US employment data pose significant challenges to market interest rate expectations.
Meanwhile, Mary Daly, President of the Federal Reserve Bank of San Francisco, said last Friday that it is "too early" to expect rate cuts, pointing out that she needs to see more evidence that inflation is steadily returning to the 2% target before easing policy.
More than two-thirds of MLIV Pulse survey respondents believe that the significant rise in global stock markets at the end of last year now appears to be a bad omen and evidence of excessive optimism among market participants. At the end of 2023, investors quickly shifted their positions and sentiment from risk aversion to chasing risk, driving up various assets such as small-cap stocks and junk bonds under the stimulus of rate cut expectations.
After a mixed start to 2024, respondents are less bullish on stocks compared to November last year, although they still prefer stocks over bonds.
Bulls dominate the stock market, but are losing ground
Respondents have a lukewarm attitude towards Bitcoin. More than two-thirds of respondents said they plan to maintain their exposure unchanged in the next 12 months, even though the first batch of Bitcoin spot ETFs in the United States finally went live this month. After the large-cap stocks led the US stock market to rise by double digits in 2023, investors are now looking for cheaper trades. 44% of market participants are more inclined to go long on value stocks rather than growth stocks.
Matt Maley, Chief Market Strategist at Miller Tabak + Co., said, "It will be much more difficult for the stock market to maintain its current high valuation levels. Too many investors equate the end of rate hikes and the beginning of rate cuts with a return to the era of free money."