New York, USA (CNN)–Whether you are a professional investor or a casual trader, the mood in the financial markets is one of anxiety and depression.
The CNN Business Fear and Greed Index is now in “extreme fear” territory. According to the latest survey by the American Association of Retail Investors, 49% of members believe the stock market will decline in the next six months, versus a historical average of 31%.
The latest survey of fund managers from “Bank of America” revealed “a very scary drop in May.”
Here’s one sign of how deep the fear is, with inflation soaring, the Federal Reserve raising interest rates and the continuing war in Ukraine: Fund managers are holding their highest monetary levels since the post-9/11 attacks.
Approximately 6.1% of AUMs are held in cash according to Bank of America. That’s compared to 5.9% in the early days of the coronavirus pandemic, and 5.4% in the midst of the 2008 financial crisis, though still below the monetary level of 8% seen in 2001.
“It is not surprising that with this daily drop in prices, liquidity is building up,” said David Combs, head of multi-asset investment at Rathbones.
Combs explained that large liquidity piles point to two main assumptions of asset managers.
First, they think clients may keep exits, and they want to make sure they have enough cash on hand to pay investors. Second, they think the market will fall further, and they want to be in a position to buy when they think it has finally bottomed out.
“Before the markets can recover, expectations have to be really low, because the recovery will come from a positive surprise,” Combs said. “Obviously you can’t have positive surprises unless everyone is really negative.”
But he believes a “positive surprise” may eventually materialize when the Fed backs off from raising interest rates sooner than expected, as price increases do the job of calming consumer demand and weak markets increase financing costs for businesses.
$6 California Gasoline Could Spread All Over America
Gasoline averaged $6 a gallon on Tuesday for the first time. Analysts at JPMorgan are warning that this price could be the national average before the end of the summer.
The startling forecast comes as US gasoline prices soared to record levels in the wake of the Russian invasion of Ukraine, casting a shadow over the economy.
“There is a real risk that the price could reach more than $6 a gallon by August,” Natasha Kaneva, head of global oil and commodities research at JPMorgan, told CNN in an email.
With US gasoline stocks remaining at their seasonal lowest levels since 2019, the bank is concerned that it will be difficult to meet intense demand during the harsh summer season.
Wal-Mart Shares Record Their Worst Day Since 1987
Inflation weighs on everyone, even the biggest stores in the world. Walmart said Tuesday that higher costs and supply chain constraints slashed its earnings over the last quarter. Walmart also lowered its profit forecast for the year, in a sign that it expects inflation to continue to hurt its business.
The results sent Walmart stock down 11.4% on Tuesday, its worst day since 1987.
What’s important about it: Walmart is the largest retailer and economic leader. It is worth noting if her expectations for the future are changing.
Walmart said in February that it expects to increase its dividend by about 3% this year. Now, she thinks her earnings will fall by about 1%.