![]() So there is definitely flows story that could unfold," Lee said. year ago and sentiment far worse and there is way more cash on sidelines. "Retail liquidations of S&P 500 and Nasdaq stocks exceeds purchases since 2019," Lee told Insider on Friday, referencing data from Goldman Sachs. That's because, according to Lee, much of the cash that's been built up over the past couple of years was withdrawn from the stock market. And yet, Lee still sees a balanced risk/reward setup for the stock market as the banking sector shows signs of stabilizing and earnings results hold up better-than-expected.Īnd if ongoing developments in the banking sector, economy, and stock market turn better-than-expected, then there's a massive $5.3 trillion pile of cash that could act as fuel to drive the next bull market in stocks. ![]() "This raises too many tail risk issues including credit tightening, commercial real estate and wide economic implications," Lee said. In a Friday note, Lee told investors that "this is a tough time to argue adding risk" given the recent collapse of First Republican Bank and the extreme volatility seen in PacWest Bancorp and Western Alliance Bancorp. That is, if the banking crisis continues to spiral out of control. ![]() Meanwhile, only 24% of respondents were bullish on stocks, which suggests that most investors are struggling to find a good reason to invest their money into equities amid the heightened uncertainty tied to the ongoing banking crisis.Īnd Fundstrat'sTom Lee agrees. The historical average for bearish responses is 31%. In AAII's most recent investor sentiment survey, which asks investors where they think the stock market will be in six months, bearish responses surged to 45% over the past week, which is a historically high reading for the 30+ year-old survey. ![]() Another reason is because investors are downright bearish on stocks. Part of the reason why investors are stocking up on cash is to take advantage of a high risk-free rate of return of just over 4%. ![]()
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