Monday (12), U.S. stocks fell back from record highs, last week’s rise of the most aggressive cruise stocks fell, reflecting the uncertainty of economic recovery. Morgan Stanley analysts said that although U.S. stocks are at record highs, but small-cap stocks and economic cycle stocks performance divergence, or reflect the economic restart than imagined not easy.
Cruise stocks such as Carnival Cruise Lines (CCL-US), Royal Caribbean Cruises (RCL-US) and Norwegian Cruise Lines (NCLH-US) fell 3% to 5%. The Russell 2000, which reflects the performance of small-cap stocks, was flat on Monday, and the index almost doubled during the epidemic, but has fallen more than 5% since seeing highs in mid-March.
Analyst Michael Wilson of the big Morgan pointed out that not long ago small-cap and economic cycle stocks are still outstanding performance, because investors bet that the United States is about to usher in economic recovery, but now investors are beginning to realize the actual implementation of the risk.
Wilson four weeks ago has begun to lower the investment recommendation rating of small-cap stocks, he said the Russell 2000 P/E ratio reached 32.5 times, showing that small-cap stocks are too expensive, vulnerable to rising interest rates, and even fall victim to supply shortages and rising costs. He downgraded the rating of non-consumer discretionary stocks to “hold” and upgraded consumer discretionary stocks to “neutral” because the former are winners in the early stage of economic recovery, but the U.S. economy may evolve faster than ever from the initial stage of the recovery cycle to the middle stage, and the latter The latter can be used as a tool to reduce portfolio risk.
Wilson said that companies are feeling the supply constraint, from raw materials, logistics to labor are, the next few weeks with the enterprise 1Q results are coming out, will hear more bad news. The U.S. corporate earnings season begins this week with three banks – JPMorgan Chase, Wells Fargo and Goldman Sachs – kicking off the season, while cryptocurrency exchange Coinbase will also list on Nasdaq.
Professional investors are reducing their positions and retail investors supporting the rise in U.S. stocks are not as active as earlier in the recent row, meaning that the rise in U.S. stocks may be difficult to support. At least two online brokerages have revealed that average daily trading volume has fallen significantly from its high earlier this year, with traffic and shareholder dwell time on brokerage websites both downward.
Max Gokhman, head of asset allocation at Pacific Life Fund Advisors, said whether retail investors continue to play an important role in the stock market will depend on what happens to retail investor behavior when the stock market pulls back sharply.
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