Investors are still playing it safe

Survey shows a majority of investors committed to little more than select US large caps and a sizable cushion of cash.

By May 15, 2012 2:18PM
Image: Stock investor (© Tom Grill/Corbis)By Igor Greenwald,

Investors remain wary of stocks, despite the market's strong start in 2012 and hopes for continued progress on the jobs front, according to the latest MoneyShow Sentiment Indicator.

The survey, completed late last month, also suggests the inflation threat remains a nagging concern, even though economic growth is widely expected to remain modest.

Although investors appear to have invested some of their ample cash reserves since the last survey was taken in late January, nearly 18% continue to keep more than half of their portfolio in cash, while an additional 27% are sitting on a cash cushion of at least 20%.

Domestic stocks, especially large caps, remain the overwhelming favorites for new investment. Precious metals have lost some popularity of late, coming in a distant third behind US small-caps. Real estate and REITs have picked up some fans to place fourth, displacing corporate bonds from that perch.

Investors' mood might be described as perfunctorily bullish, with 40% expecting gains of less than 10% from recent levels for the balance of the year, and another 26% counting on the market to mark time. Nearly 23% are forecasting a market drop, up from 21% three months ago, though the proportion of respondents expecting a decline of at least 10% has fallen.

Perhaps investors are cautious because of their growing conviction that the Federal Reserve might soon start draining the punchbowl. A slight majority (54%) now expects the Fed to begin unwinding some of its asset purchases by the end of this year, perhaps a year ahead of Wall Street's timetable. Three months ago, only 43% thought the Fed would act with such alacrity.

Yet if the Fed does change its tune, it won't be because of an overheating economy, according to investors. Sixty-two percent of the respondents expect the gross domestic product to continue to grow at a rate below 3%, while 26% still think growth will slow toward stall speed and nearly 5% expect a recession. Only 7% are counting on the economy to expand faster than 3%, optimism on that score dwindling since January.

On a happier note, 38% of the respondents expect unemployment of no more than 8% by year's end, up from 33% in January. Investors are also slightly more inclined to expect President Obama's re-election, with 54% predicting a second term, up from 51% three months ago.

As for change, investors no longer seem to believe in much of that, extrapolating the current economic and financial environment into year's end with little more than the occasion tweak here or there. If the future proves more interesting than that, expect some dramatic moves in asset prices.

More from

May 15, 2012 3:09PM
With all of the uncertainty in the world, investors should play it safe.  You have to make it last thru retirement or just make thru these hard times.  You have to lookout for yourself.  Look at Chase or Greece. 
May 16, 2012 9:56AM
patton fan...the problem is the average American CAN'T see through the smoke and mirrors! That is why this type of crap works...most people know nothing of policies that would concern them. They only know what they hear or think they hear!
May 15, 2012 4:41PM

Blame it on Greece, or the EU in general, but the real problem is lack of jobs in this country.  As the election grows closer, you will see the Obama camp continue to attempt to create diversions from the real problem which is no jobs.  First the war on women, then class envy and now gay marriage. The average American can see right through his smoke screen and it will show at the polls in November.  Once he is on his way back to Chicago or Indonesia the economic engine in this country will take off.  For those of you old enough to remember the "great depression" do you remember how ineffective FDR's pump priming crap was?  It effectively extended the depression right up to WWII.  Thank god somebody had the foresight to protect this country from stupid voters by limiting the term of President to 8 years.  WPA worker pissing around.

May 16, 2012 9:06AM
Face it. The worlds not coming to an end and the inflating process will begin as soon as possible.
May 16, 2012 11:37AM

bush =dow 6000..........war and religion

obama= dow 12000.....less war less religion

May 16, 2012 12:09PM

Your statement that "38% of the respondents expect unemployment to be no more than 8% by year's end" confirms that 38% of the people in this Country ARE the problem. These figures have absolutely no basis in fact. The current unemployment rate does not add up. Numbers do not lie. The Government does. This is nothing more than politically motivated  fiction. You cannot have over 300,000 WEEKLY first time filers for unemployment with less than 200,000 MONTHLY new jobs for the last year and a half, and then actually be stupid enough to believe that the unemplolyment rate has dropped! Believe nothing of what the Government tells you, and only half odf what you see.          

May 16, 2012 12:00PM
The party is over.  Time to pay the bill.  It is going to be ugly. 
May 16, 2012 11:35AM

worst disease in human history.................................CHRISTIANITY

the religious lemmings in america are too busy telling others what to do

May 16, 2012 12:35PM

if you pay all the money to the ceo's and make welfare higher than the minimum wage

why should anyone but ceo's want to work?

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