Jeenah Moon/Reuters
- About 29% of investors view COVID-19 variants as the greatest risk to markets, according to a JPMorgan survey.
- Investors also cited a possible correction in expensive equity sectors and stronger inflation as dangers to the bull market.
- Six-in-ten respondents deemed cryptocurrencies as being in a bubble, and nearly all said they believe fraud is at least somewhat prevalent in the space.
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Investors are split on which downside risks are most likely to topple the stock market’s bull run.
JPMorgan surveyed clients attending its Macro Quantitative conference in late January on several aspects of the current investing landscape. The questioning came as stocks sat near then-record highs, lifted by hopes for another stimulus bill and declining COVID-19 case counts.
Concerns of overvaluation and the emergence of new COVID-19 variants have since dented the market’s run-up, and those risks remain top of mind for investors. About 29% of surveyed investors deemed coronavirus mutations the biggest risk to markets, while 28% cited a correction in expensive equity sectors, according to JPMorgan. Roughly one-fifth of respondents named rising yields and stronger inflation as a major risk.
Only 13% of investors cited concerns of central-bank tapering. The Federal Reserve has indicated it won’t slow the pace of its asset purchases until the US economy makes “substantial further progress” toward reaching above-2% inflation and maximum employment. For now, the Fed continues to buy at least $80 billion of Treasurys and $40 billion of mortgage-backed securities each month.
A double-dip recession scenario was the least-feared market risk, garnering just 9% of investors’ votes.
Nearly 60% of investors thought cryptocurrencies were in a bubble. Bitcoin had just fallen from highs of nearly $40,000 at the time of the conference and now trades near $52,000.
Only 11% of investors said they trade cryptocurrencies, and of those who said they don't, 22% plan to start. A majority of respondents said they believe cryptocurrencies are "here to stay." More than three-quarters of respondents expect tighter regulation of the cryptocurrency market, and almost all investors believe fraud is either somewhat or very prevalent in the space.
Electric vehicles and green tech stocks were viewed as a bubble by 29% of investors surveyed, according to JPMorgan. Only 3% of investors saw bond-proxies as trading in bubble territory despite yields sitting close to record lows.
Nearly half of the survey's respondents see ESG funds receiving the largest inflows, while risk parity strategies are expected to see the largest outflows. About 84% of investors expect value outperformance to continue as the economy reopens and ailing sectors rebound.