Wealthy Investors Aren’t Chasing The Rip, They’re Waiting To Buy The Dip

Jeff Gundlach and Kyle Bass are not the only ones who think the market’s April rally has gone to extremes. A new poll via UBS Global Wealth Management shows increasing concern among the world’s wealthiest investors that a pullback in the stock market is needed before they start buying.

The new survey showed 61% of wealthy investors and business owners (2,928 investors and 1,180 business owners between April 1-20) with over $1 million in investable assets or annual revenue are expecting a selloff in the market of 5% to 20% before they would buy the dip. About 23% of respondents said it was a market that they were willing to chase. And about 16% said the latest move was a bear market rally and further downside is ahead.

The April survey showed 60% of respondents believed a global recession was likely in the next 12 months.  

Gundlach and Bass, in separate interviews this week on CNBC, both echoed similar thoughts on how signs of unprecedented economic distress have resulted in a V-shaped recovery for the stock market. As shown below, the E-Mini S&P500 has soared 34% in 25 sessions to a near kiss of the daily 200EMA. 

The share of wealthy investors that are optimistic about the short-term performance of the US economy has more than halved from 68% to 30% in the period from the start of January to April.

“While short-term investor optimism across the globe has dropped significantly, levels seem to align regionally with the pandemic cycle,” said Paula Polito, divisional vice chairman at UBS Global Wealth Management.

“In Asia, where the Covid-19 crisis and mitigation occurred earlier, investors appear to be slightly more optimistic about their region’s stocks. By contrast, optimism appears lower in the US, which is currently experiencing an apex in the crisis.”

Of course, you don’t need to be a wealthy UBS client to understand there is a deep disconnect between the market and the real economy. Main street America has been wiped out, with approximately 30 million job losses in the past 6 weeks alone. And a new shocking report on Monday showed perhaps 50 million people have lost their jobs in the pandemic. Nevertheless, the Fed and Trump admin continue pumping record amounts of stimulus and bailout money to revive corporate America and Wall Street speculators. 

If the economy doesn’t improve, meaning a V-shaped recovery is not seen and more of a U-shaped or L-shaped, it would suggest stocks have a long way to drop, likely resulting in the Fed panic buying stocks.