According to a new E-Trade survey shared exclusively with CNBC, wealthy investors with at least a million dollars in investable assets are becoming less bullish on stocks in early April than they were at the start of 2021. The survey also revealed the number of respondents who went to cash nearly doubled.
Overall sentiment among millionaire investors slipped as respondents who say they are bearish jumped six percentage points, from 36% to 42%.
The survey was conducted from April 1-12 when main US equity markets powered to new highs.
One surprising find in the survey was the number of respondents who went into cash more than doubled from 7% to 16%.
Still, the majority (58%) of these wealthy investors remain bullish.
The survey findings reveal some insight into the world of retail who have been on a stock and option frenzy since the beginning of the virus pandemic, which began right around the time the Federal Reserve pumped financial markets with trillions of dollars and the federal government unleashed helicopter money and gave tens of millions of folks stimulus checks, where some took the free money and gambled in the stock market casino.
Wealthy investors, some of whom fear a pullback in stocks, are protecting gains by going into cash. Simultaneously, the number of institutional desks warning about market turbulence is increasing.
Rick Rieder, CIO of Blackrock’s global fixed income and head of global allocation, warned Tuesday that the market “feels a bit frothy… last week was a bit eery for me.” While he explained that this is “the most exciting time” to be investing, he noted the largest asset manager in the world has pulled back a little amid the ‘buy everything’ mentality (and the waves of fiscal and monetary policy and surges in economic data).
Rieder told the CNBC anchor who desperately tried to spin all that as “Goldilocks” to which he responded by asking ‘what happens after goldilocks?’ warning that “The Fed is overdoing it…”
Why did equities rally? Why did Treasuries rally? Why did commodities rally?
In the last 50 days, around $700 billion has gone into the system from the Treasury… and add The Fed’s adding its liquidity too…
“There’s too much liquidity… there is literally no value in the markets today,” he said.
… and it’s not just the folks at Blackrock warning about frothy markets – Morgan Stanley, BofA, Deutsche Bank, and Goldman Sachs have joined the growing chorus of sell-side researchers suggesting a volatility surge could be ahead.
All of this comes as the Wilshire 5000 Total Market Index, a market-capitalization-weighted index of the market value of all American stocks actively traded in the US, has nearly doubled since the pandemic low as the Federal Reserve and politicians continue to pump equities to the moon without the care in the world for valuations.
There comes the point when “Greater fool theory” runs out of fools, and the whole house of cards comes tumbling down. Perhaps we’re nearing that inflection point today.