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What do the big shareholders think? The "god of stocks" is cutting heavily, and the "king of bonds" warns against bottom fishing.

AInvestSunday, Aug 4, 2024 8:30 pm ET
1min read

Data disappointments, big hedge fund selling, market chill.

As the S&P 500 fell sharply on Friday, not only did the Bear Stearns signal to the market that it was pessimistic, but the “bond king” Bill Gross also sounded a pessimistic note on the S&P 500.

On Friday morning in China, Gross said on X:

“There are few bulls left in MLPs, banks, and financials.”

“Investors should not be talking about bottoming, but should be focusing on selling.”

Earlier this week, Berkshire Hathaway’s quarterly report showed that the company reduced its Apple stake by about 50% to about 400 million shares from 789 million shares in the first quarter; Berkshire also sold about 90 million shares of Bank of America for about $3.8 billion since July.

Some analysts pointed out that the size of the Bear Stearns selling suggests that the billionaire believes the entire market is too expensive.

The Bear Stearns indicator of market fever (S&P 500’s market cap/GDP ratio) has already soared above 180%, indicating a severe overvaluation.

Cathy Seifert, an analyst at CFRA Research, commented that Bear Stearns’s big selling may be due to recession concerns, saying that Berkshire is a “company that is preparing for a weaker economic environment.”

Jim Shanahan, an analyst at Edward Jones, bluntly said that Bear Stearns’s move was a “sell signal”:

“The level of selling is much higher than we anticipated.”

In an interview at the end of July, Gross said that, unless AI companies can raise U.S. productivity from the historical 1-2% level to 2-3%, value stocks will outperform growth stocks in the long run because of their lower initial valuations and higher dividend yields.

However, some Wall Street analysts remain optimistic.

Jay Hatfield, the CEO of Infrastructure Capital Advisors, said in a report on Friday that the nonfarm payrolls report confirmed that the economy is slowing down, but it does not mean the U.S. is entering a recession.

He reiterated his previous target of 6,000 points for the S&P 500 annual target, which is still 12% higher than the closing price on Friday. Hatfield expects a rebound in the S&P 500 before the election results are known.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.