If you’re wondering what to do about your retirement portfolio amid all this craziness and turmoil, try waiting until this coming Tuesday.
That’s when we’re due to get the latest news on what the world’s top fund managers have been doing with our money during the last month of turmoil.
If they’ve completely bailed on stocks — buy!
But if they haven’t, you might want to think twice. Or even three times.
It hasn’t even been a month since fund managers told BofA Securities that they were eagerly buying U.S. stocks with both hands, even though they also said the market was wildly overvalued. As this column pointed out at the time, this was obviously insane.
Since then, the Dow Jones Industrial Average DJIA has fallen nearly 4,000 points. The S&P 500 SPX has fallen 8%, even including the latest bounce, while the Nasdaq Composite COMP and the Russell 2000 small-cap index RUT have fallen just over 10%. The so-called Magnificent Seven MAGS group of tech stocks — Apple AAPL, Amazon AMZN, Alphabet GOOG, Meta META, Nvidia NVDA, Microsoft MSFT and Tesla TSLA — has fallen nearly 15%.
Someone who responded to the survey by betting against the fund managers and purchasing the Direxion Daily S&P 500 Bear 3X Shares exchange-traded fund SPXS would have made 30% in a few weeks. Booyah!
The fund managers’ survey is a powerful magnetic south, or contrarian indicator. When these fund managers are overinvested in stocks, it is generally a bearish signal — and vice versa.
The fund managers’ survey is the basis for this column’s regular “Pariah Capital” feature, where we highlight the assets that the big-money investors don’t want and don’t own. These often prove to be terrific investments.
If the next survey shows that fund managers have turned cautious, this offers at least some room for the market to find a floor, even if temporarily. Once the big money has already sold its stocks, it has less room to bail further.
None of this, though, necessarily addresses the longer-term issue.
The S&P 500 index of U.S. stocks currently sells for 20 times the forecast per-share earnings of the next 12 months. Or, to put it another way, for every $100 you invest in the index, you can expect $5 in after-tax earnings over the next 12 months, a 5% yield.
