Be greedy in your 401(k): The ‘big money’ is still fearful – MarketWatch
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Brett Arends’s ROI
Last Updated: July 19, 2023 at 2:33 p.m. ET First Published: July 19, 2023 at 1:11 p.m. ET
Like the man says…
Photo by Chip Somodevilla/Getty Images
[]Warren Buffett likes to say that the time to be greedy in the stock market is when everyone else is fearful. And the time to be fearful is when everyone else is greedy.
[]So if you’ve been watching the balance on your 401(k) and IRA go up and up so far this year, and you’ve been getting nervous that sentiment is just too darn giddy, here’s some good news.
[](Or, rather, some good news masquerading as bad news.)
[]The Big Money has spoken. All $588 billion of it. And even though the S&P 500 SPX, +0.24% is up 20% so far this year, it’s still fearful.
[]Which, according to Buffett’s principle, means we can relax a little. We don’t have to stop being greedy. Not yet, anyway.
[]We are talking, as so often, about the best monthly publication on Wall Street: the survey of global money managers conducted by BofA Securities. (It began under Merrill Lynch.)
[]This month, BofA spoke to more than 220 chief investment officers, asset allocators and portfolio managers around America (and the world) handling a total of $588 billion in assets.
[]Bottom line: They remain deeply skeptical of this year’s boom, and many are still sitting on the sidelines.
[]They have raised the average amount of cash they are holding in portfolios from 5.1% to 5.3%.
[]They have edged up their exposure to the stock market in the past month, but only slightly. They remain on average as underinvested in stocks as they were (briefly) during the Covid panic of March 2020, and during much of the global financial crisis in 2008-9, the survey reveals.
[]Naturally those moments proved excellent moments in which to buy stocks.
[]Meanwhile they have stampeded out of commodities: The survey reports the biggest three-month plunge in their exposure to commodities in nearly a decade. And they are now as underinvested in commodities as they were in May of 2020, when the world was still in the early days of the Covid crisis and oil prices had recently gone negative.
[]The survey also reports that money managers are also overall under invested in real-estate investment trusts and in utilities.
[]Overall, according to BofA Securities’ in-house index of the survey’s monthly sentiment, the Big Money is about as bearish and gloomy as it was during the 2008-9 global financial crisis, the European debt crisis a decade ago, the March 2020 Covid panic, and various other… er… excellent long-term buying opportunities.
[]I’ve been following these surveys since before 9/11. (For a period they even included a question on gold on my suggestion, though it’s since been dropped.) This survey isn’t a 100% guaranteed magnetic south (in other words, a contrary indicator), but over time it has been pretty good. When the money managers have all stampeded to one side of the boat, it’s often paid to go to the other side.
[]Wall Street traders might look at the fine print of the survey, but it’s probably more helpful to take a step back and look at the overall picture.
[]Right now the Big Money is much more bearish than usual. And that’s bullish.
I’m 52, single with no kids and only $190,000 in 401(k) assets. ‘I don’t want to die alone and forgotten in my home.’ What should I do?
[]Have a question about your own retirement savings? Email us at [email protected]
[]Brett Arends is an award-winning financial writer with many years experience writing about markets, economics and personal finance. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He has worked as an analyst at McKinsey & Co., and is a Chartered Financial Consultant. His latest book, “Storm Proof Your Money”, was published by John Wiley & Co.
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