Buy-the-dip euphoria
Institutional investors are offloading equities to retail buyers in a traumatized market.
Retail traders just plowed money into the equity market for a ninth straight week. That’s a stark contrast to the firm’s hedge fund clients, which last week sold $4 billion of stocks, the most on record.
Who exactly constitutes the smart money on post-pandemic Wall Street is a point of debate after mom and pop day traders dove into stocks as they were bottoming two years ago.
While a single example of prescience doesn’t imply the retail crowd is right this time, the fortunes minted at the bottom of that crash have constituted powerful psychological conditioning during two years of buy-the-dip euphoria.
A question related to the debate around who has it right at present is whether stocks have fallen enough to become bargains. Based on forecast earnings, the S&P 500 looked much cheaper than it was in January. At 18.3 times profits, the index’s valuation is at the lowest level since the month right after the 2020 pandemic crash and was in line with its five-year average.
While many factors differ now versus then, some market watchers say the S&P 500’s bottom will only form when the YOLO crowd capitulates.
Bloomberg 8 March 2022
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