As the US stock market continues to soar, US investors are becoming increasingly nervous about the overvaluation of the US stock market, which means that the S&P 500 index's gains in the second half of this year may be limited.
According to the latest Bloomberg Markets Live Pulse (MLIV) survey, most market investors believe that the US stock market will experience a pullback in the second half of this year or next year. The unexpected risks in the field of artificial intelligence and the potential headwinds in the US economic outlook are the two major factors that investors are most concerned about.
The soaring US stock market has caused investors to panic
In 2024, the performance of the US stock market was very strong, with the S&P 500 index frequently breaking new historical highs. Since October 2022, driven by technology stocks, the Nasdaq index has surged by about 50%, and the gains in this bull market in the US have exceeded the median of all bull markets since 1957. From the monthly chart, it can be seen that the S&P 500 index has achieved monthly gains in 6 out of the 7 months from November last year to present.
From June 17th to June 21st, Bloomberg surveyed 586 investors, including Wall Street portfolio managers, economists, and retail investors. The survey results show that although US stock investors have no plans to sell their stocks temporarily, they are increasingly concerned about the high valuation of US stocks.
A survey shows that about three-quarters of respondents said they will maintain or increase their exposure to the S&P 500 index in the next month.
However, about half of the respondents indicated that the US stock market will experience at least a 10% pullback in the second half of this year; An additional 35% of respondents indicated that the US stock market may experience a pullback in 2025.
This widespread cautious sentiment is also evident in the options market, where traders have been building hedges for potential losses in technology stocks.
The upward potential of the US stock market within the year may not be significant
Due to the continued growth of the US economy and corporate profits, as well as sufficient liquidity in the financial system, most respondents believe that there is room for further gains in US stocks this year, but the increase may not be significant.
The median estimate for the survey is that the S&P 500 index will close at 5606 points by the end of 2024, which means it is only nearly 3% higher than last Friday's close. However, this is already more optimistic than the median expectation of Wall Street strategists - the median expectation of Wall Street strategists is at the end of the year, and the index is basically at the current level.
Ed Clissold and others, strategists at Ned Davis Research, wrote in their latest report that the current favorable trend in the US stock market is justified. However, as time goes on, considering all the issues investors will face in the second half of the year, including issues such as the Federal Reserve's monetary policy and the US election, investors will become increasingly skeptical.
These strategists wrote in their report that investors are advised to "temporarily maintain their holdings in stocks. However, be prepared to hold more defensive positions, especially in the third quarter."
Michael Orourke of Jones Stranding pointed out:& quot; We are in the midst of a foam. There is a great risk that the economy will eventually slow down in the second half of this year. The P/E ratio should shrink... This is a very dangerous level for long-term investors who buy stocks.
AI and economic risks are the most concerning
Artificial intelligence is the main driving force behind the nearly 15% rise in the stock market this year, but it is also considered the most likely factor to trigger a sell-off: 31% of respondents remain vigilant about negative risks in the field of artificial intelligence.
In addition, investors' concerns about the economy cannot be ignored. About 27% of respondents said that as the US stock market unemployment rate rises, the stock market may fall; Nearly a quarter of the respondents are concerned that the risk of unexpected inflation increases in the United States will keep the Federal Reserve on hold for a longer period of time.
The unemployment rate in the United States rose to 4% in May, the highest level since early 2022. Goldman Sachs economists warn that the US job market is at a potential turning point, and further weakness in demand for workers will affect employment.
"The overall economic situation in the United States is confusing - inflation seems to be subsiding, but employment seems to be slowing," said Kim Forrest, Chief Investment Officer of Bokeh Capital Partners, in an email