(Bloomberg) — Think the sizzling U.S. stock rally is excessive in an economy frozen by shutdowns? From one perspective, it’s just getting started.Giant piles of cash sloshing around the financial system means there’s substantial ammunition yet to push risk assets higher. JPMorgan Chase & Co., meanwhile, sees potential for billions to flow into equities at the expense of bonds to rebalance portfolios. Money-market funds have lured $1.2 trillion this year, while fund managers with $591 billion overall are holding cash at levels rarely seen in history, according to Bank of America Corp.All that shows how much firepower investors have to support the market at a time when stock prices look unhinged from fundamentals like corporate profits, and trade frictions between China and the U.S. return to the forefront.“Investors are still underweight equities and signs of overextension are confined to momentum traders,” JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note. “There is still plenty of room for investors to raise their equity allocations.”JPMorgan says the equity allocation of non-bank investors — a group that includes households, pensions, endowments and sovereign wealth funds — will probably rise to 49% in the coming years, given the backdrop of low interest rates and high liquidity. Currently, the proportion is 40%.Just ask John Roe, the head of multi-asset funds at Legal & General Investment Management. He started buying more shares recently after finding few opportunities in credit. The investor sees a self-reinforcing rally as higher prices draw more buying and positioning, but he’s having to look past his concerns that the pandemic will causing lasting damage to the economy.“Equities have reached a range where we worry about self-reinforcing momentum,” Roe said. “It’s very tough when we are fundamentally negative and think the scarring risks are under-appreciated.”Another sign of cautious sentiment: investors are deeply short the market, so there’s potential for stocks to rally when they cover their positions.Speculators have built up the largest net short position on S&P 500 futures since late 2015, according to regulatory data. Short interest in the world’s largest exchange-traded fund — which tracks the U.S. stock benchmark — is also still hovering close to its peak in March, according to Markit data.Among retail investors and the like, risk appetite may be returning gradually.U.S. stocks and credit funds recorded stronger inflows in the week through Wednesday, according to EPFR Global data cited by Bank of America. At the same time, flows into money funds slowed and government bond funds saw redemptions for the first time in six weeks.As the bank’s strategists led by Michael Hartnett put it succinctly: “Positioning still bearish, policy bullish.”So who’s buying? Certain breeds of quants, for one. Momentum traders, like commodity trading advisers, are the only overextended part of Wall Street, according to JPMorgan.By its estimates, the momentum signal for U.S. stocks has returned to elevated levels. The last time the overbought signal was this stretched was near the beginning of this year, just before stocks plummeted. Even so, profit-taking by momentum investors is unlikely to derail the bull market, JPMorgan strategists said, given low equity allocation by other kinds of investors.As for other quant investors, Nomura Securities projects that U.S. volatility-control funds — which target a particular level of price swings — are finally piling into stocks again as the market calms. Their estimated equity exposure remains around the second percentile in data going back to 2010, meaning that it was lower just 2% of the time, strategist Charlie McElligot wrote in a note.In sum, with the S&P 500 trading at a two-decade high versus the coming year’s earnings, stocks might look pricey. But few investors have actually poured their cash in.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Zoom is set to report earnings after the bell on Tuesday. Yahoo Finance’s Dan Howley joins Kristin Myers to discuss.At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each […]
Miami-Dade County High School Teacher Amy Scott joins Yahoo Finance’s On The Move panel to address how the COVID-19 pandemic is impacting teachers across the nation.There is a laser-precision technique that tells us whether the precious metals market is going to move higher or lower, and it could take form of a …
Eli Lilly announced the company has started an early-stage trial to test its potential treatment for coronavirus. Yahoo Finance’s Anjalee Khemlani breaks down the latest developments.
Last week the SpaceX Crew Dragon capsule successfully launched into orbit. Yahoo Finance’s On The Move panel share the details.Shares in Minerva Neurosciences Inc. (NERV) tanked 72% after the company's experimental drug roluperidone tailored for the treatment of schizophrenia did not meet its primary and key secondary endpoints in a Phase 3 trial.The stock sank 72% to $3.71 on Friday. The clinical-stage biotech company said the trial conducted among 513 patients did not demonstrate “statistically significant difference from the placebo” in narrowing disease symptoms at week 12 of the treatment. However, the study did show that the roluperidone experimental drug was generally well tolerated, the company said.“Even though this study didn’t achieve its primary and key secondary endpoints, primarily due to a larger than expected placebo effect at Week 12, results obtained with the 64 mg dose including the early onset of effect and functional improvement as measured by PSP suggest roluperidone merits continued investigation for the treatment of primary negative symptoms,” said Remy Luthringer, Executive Chairman and CEO of Minerva. “We intend to consult with the US FDA about the next steps in the development of roluperidone for this indication after we complete the analysis of the study data.”Roluperidone is being developed as a treatment for the negative symptoms of schizophrenia that can persist chronically throughout patients’ lifetimes and contribute to poor quality of life and functional outcomes. The experimental drug has in the past been shown to potentially block serotonin receptors and sigma receptors, two receptors in the brain that are involved in the regulation of mood, cognition, sleep and anxiety.In reaction to the announcement, five-star analysts Myles Minter at William Blair and Biren Amin at Jefferies on Friday both cut Minerva's stock to Hold from Buy. Amin, who has a $2 price target on the stock does not believe the FDA will consider benefit on a secondary endpoint when a study fails on a primary endpoint, leaving an unclear path for the drug.The rest of Wall Street analysts have 3 Buy ratings on the stock adding up to a Moderate Buy consensus. The $15.75 average analyst price target now implies a staggering 325% upside potential in the shares in the coming 12 months. (See Minerva stock analysis on TipRanks). Related News: Moderna Embarks On Phase 2 Study Of Covid-19 Candidate; Shares Pop 11% Efgartigimod’s Positive Data Is Good News for Momenta’s Nipocalimab Novavax Seeks To Make 1 Billion Covid-19 Vaccine Doses; Top Analyst Ramps More recent articles from Smarter Analyst: * Abiomed’s Heart Pump Gets FDA Emergency Use Status For Covid-19 Patients * Eli Lilly’s Taltz Injection Gets FDA Nod For Inflammatory Spine Arthritis Treatment * Zynga Snaps Up Peak For $1.8B In Its Largest Deal To Date; Shares Up 7% * Eli Lilly Starts Dosing Patients In World’s First Covid-19 Antibody Trial
Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial […]
The treatment, Ibrance, was being tested along with the standard of care for early breast cancer in men and women, against standard of care alone, the company said on Friday. The study was broadly seen to have a high probability of success readout, but the early failure represents a meaningful setback for Pfizer, JP Morgan analysts said in a note, cutting its price target on the stock by $1 to $37.