Stockwatch: Few investors think stocks have bottomed

Stock markets are volatile but the S&P 500 remains above June’s bear market low. So have stocks bottomed or is more pain ahead? The latter, according to a Deutsche Bank investor survey.

Just 9 per cent believe June’s lows marked the bottom, notes Deutsche Bank’s Jim Reid. Most – 58 per cent – reckon stocks will hit their lows for the cycle in 2023. A third think stocks will bottom later this year.

Market pessimism is informed by economic pessimism, with 80 per cent expecting the US to fall into recession in 2023.

Further market lows may well be ahead. Deutsche Bank’s Binky Chadha says the outlook is quite binary, with stocks potentially falling another 25 per cent if the US falls into recession. If recession is avoided, however, he expects indices to rally back to their prior peaks.

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Indeed, Chadha cites low investor positioning in stocks as one reason why a strong year-end rally is likely. Clearly, investors see summer’s advance as a mere bear market rally. Low expectations mean stocks have room to run if news in upcoming months is not as bad as feared.