Four in five U.S. financial advisors in a new poll expect stocks to fall below the 2,237 points the S&P 500 hit on March 23, down 34% from its peak on Feb. 19, Ned Davis Research reported Tuesday.
The NDR poll was conducted March 26 among some 750 advisors.
More than half of participants said they expected a new low to be reached by May 31, while one in four anticipated the market to bottom at a later date.
Only 19% of advisors believed stocks had hit the low on March 23.
NDR said the advisor community’s pessimism aligned with its own perspective that stocks are likely to see more volatility until they reach their bottom.
“The volatility we’ve seen over the past few weeks will make it into history books, but it’s likely we haven’t seen the end of it,” NDR’s chief U.S. strategist, Ed Clissold, said in a statement. “We’ll remain cautious on U.S. equities until breadth thrusts indicate that the market is recovering.”
Clissold said the bottoming process comprises four stages:
- Breadth thrust
He noted that the three-day rally following March 23 likely signaled the end to a waterfall decline, meaning that the market had advanced to Stage 2.
The market can now bounce between Stage 2 and Stage 3 several times, until it experiences a successful retest with less total volume, less downside volume, fewer stocks making new lows and fewer stocks below their moving averages.
According to NDR, financial advisors’ pessimism could be driven by their outlook on the limitations of fiscal policy. Seventy-five percent those surveyed said the fiscal stimulus would ease only some of the damage done to the U.S. economy.
Just 7% believed that the stimulus would not have any positive effect or could lead to negative outcomes, such as inflation.
“The U.S. government’s fiscal response is tailored to this specific crisis, with a greater emphasis on loan guarantees and unemployment support that reflects the extreme drop in economic activity,” Alejandra Grindal, senior international economist at NDR, said in the statement.
“However, it will take some time to implement and we may need more stimulus down the road.”
Brian Sanborn, senior vice president of wealth management solutions at NDR, said that considering the continued uncertainty, financial advisors were unsurprisingly cautious about deploying their clients’ assets back into stocks.
“Until the dust settles, we are likely to see greater allocations to cash and less risky assets,” Sanborn said.
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