Our economy is in tatters. The pandemic is far from over. Fund managers and high-performing traders are taking a bearish stance and staying away from the markets. Yet by all indications, this is a stock picker’s market. What’s going on?
Top traders are still in the bearish camp
What makes a fund manager, strategist or trader flip from bearish to bullish? They likely have a set of criteria or a system that triggers a change in their approach and allows them to get ahead of the curve. They pull out of positions before a big drop or load the boat before the market surges.
By sticking to this system, they boast robust returns that are the envy of investors. Warren Buffett, David Tepper, Ray Dalio, Stan Druckenmiller, Mark Cuban, Paul Tudor Jones and Sam Zell have untouchable track records.
Right now, they are sitting firmly in the bearish camp, showing a distaste for the stock market in general. Though they typically take big risks during a time of uncertainty, they have stepped back. Is it because of the overvalued market? Are they worried we are entering another great depression? Is the extremely loose money policy or flatlined economy giving pause? Or is the yet-to-be-contained coronavirus pandemic spooking them? The answer is anyone’s guess.
We are looking at a stock picker’s market
The market crash of 2020 has brought some big changes. The Fed is ever-present and providing massive liquidity. Throwing money at the problem won’t always work, but in this case, the government is tossing a massive life raft into the sea to help anyone who needs a bailout.
The stimulus has set up a perfect stock picking environment, which is why I’m puzzled that the most successful traders are remaining on the sidelines. They tell everyone to avoid the markets, though the markets are racing higher. They are only 20% below all-time highs (yes, really), which leads me to doubt that we’ll see a retest of those March lows.
I suspect the longer the markets stay elevated, the sooner these trading giants will buy stocks again. If the opportunity is there, don’t sit by and watch. Bearish traders make money, but long-term bullish traders do far better.