Most Pro Investors Think Retail Investors Are Complete Fools When It Comes To Stocks Right Now

Golman Sachs recently polled over 800 clients at their Global Macro Conference in regards to asset classes they liked and the risks they worry about most.

A full 38% selected Equities as the asset class they are ‘most positive or overweight’, while just 18% chose Commodities, 15% Cash, 14% Alternatives (hedge funds/private equity), 10% Corporate Bonds, and 5% Government Bonds. This seems to be the exact opposite of retail investor beliefs, if we use fund flow data as a proxy for retail investors’ view on asset classes. (money has flowed out of U.S. equity funds and into bond funds over the last year based on Investment Company Institute data, a recent Citi chart shown below)


In terms of risk, 31% selected a ‘Double Dip’ as their largest concern. Inflation in developed markets such as the U.S. was chosen by just 17%, the lowest rated risk within the survery. Yet inflation in developing markets was a far larger concern — 30% are worried about ‘Emerging Market Inflation’ (ie., probably Chinese inflation). Only 22% listed Developed Market Deflation as their largest worry.

The most favoured stock market for 2010, as the potential ‘best performer’, is China (29%), followed by the U.S. (22%). Only 2% believe Europe will be #1.

We admit it, it’s worrying so many pros are loving stocks over government bonds these days, even if retail investors remain overwhelmingly bearish on stocks and long bonds. A true contrarian is piling into U.S. treasuries it seems, given that only 5% of pros chose it as their favourite asset class. Which means we’ll pass on being contrarian for now.

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(Via Goldman Sachs, Weekly Kickstart, 19 Feb 2010)

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