- Dow Jones is up 20% in 2019 but billionaire investors are not convinced.
- Buffett, Gartman, and high profile investors are focusing on building cash-focused portfolio.
- Other major markets are at risk of imminent recession, placing more pressure on global economy.
The Dow Jones is up 500 points in the past five days and retail investors seem to be happy. But, high profile investors are actively raising cash and encouraging others to do the same.
Warren Buffett, James Gartman, and some 500 funds are either maintaining a large cash holding or predicting a stock market correction in 2020.
Too many variables with the Dow Jones
Unresolved trade disputes, tension between NATO allies, and threats of countermeasures by China amidst ongoing Hong Kong protests are some of the many variables that have the potential to slow down the Dow Jones.
Billionaire investors and famed strategists have seen significant risks in the stock market in recent months. As Gartman closed down The Gartman Letter this week, he said that individual investors have to look to expand their cash portfolio over stocks.
Essentially relying on the progress of the trade war as the main catalyst of the stock market is likely to end badly, Garman said.
When you conjure up a trade war such as he’s conjuring up — you’ve heard it before and you’ll hear it again — this is a very slippery slope, and once you go down that slope, it usually ends badly.
Berkshire and Buffett have not publicly expressed their stance on the current trend of the stock market. However, Buffett’s record $128 billion cash holding and his redundancy regarding a $6 billion deal involving Tech Data shows he is not convinced of the pricing of the market.
Global stocks gain another $400bn to $82.2tn, highest since May2018, as a brief ~2% downdraft earlier this week was rescued by a very strong Payrolls report. Global mkt cap now equal to 95% of global GDP, just 5ppts below Buffett’s favourite 100% bubble indicator. pic.twitter.com/l0bMp2tD9r
— Holger Zschaepitz (@Schuldensuehner) December 8, 2019
Ray Dalio, the Bridgewater Associates founder whose net worth surpasses $19 billion, also said that the system of the U.S. is “broken,” and that a major paradigm shift is imminent.
His statement comes after the hedge fund reportedly recorded a drop of 6% despite the Dow Jones rally.
500 major funds are taking a wait-and-see approach
The Natixis Global Survey of Institutional Investors report released earlier this month showed that 500 of the biggest funds globally expect a drop of the stock market in 2020.
The report read:
But even as they see a wide range of risks for 2020, portfolio projections show institutional investors are not willing to make big bets that these concerns will be realized by markets around the world. Instead their strategy appears to be ‘Let’s wait and see’”
The research firm emphasized that 75% of institutions foresee retail investors liquidating holdings prematurely to as recession fears intensify.
Other markets are suffering too
It’s not just the U.S. and the Dow Jones that have investors concerned. Major economies like Germany and the U.K. are also at risk of recession.
Germany released fallen factory output that indicates the recession of the manufacturing sector is speeding up. The U.K.’s economy fell for the first time in 7 years as Brexit troubles loom.
The Dow Jones has had a strong year in 2019, up more than 20% year-to-date as of December 9. However, as high profile investors lean towards a cautious stance towards the near-term trend of the U.S. stock market, it is time for retail investors to take notice.
Author: Joseph Young