A significant difference exists between opinions of computer-guided traders and human discretionary investors in the stock market. Computer-driven strategies focus on momentum and volatility, while discretionary managers consider economic and earnings trends. This divergence is historically uncommon and tends to be short-lived. Discretionary investors are cautious, waiting for economic signals such as growth slowdowns or inflation spikes. Professional investors have reduced equity exposure due to uncertainties regarding trade and economic conditions, with some hoping for a market selloff to justify purchasing stocks at record highs.
Computer-guided traders haven't been this bullish on stocks compared to their human counterparts since early 2020, before the depths of the Covid pandemic, according to Parag Thatte, a strategist at Deutsche Bank AG.
Discretionary investors are waiting for something to give, whether that's slowing growth or a spike in inflation in the second half of the year from tariffs.
As the data trickles in, their concerns will either be proven right if the market sells off on growth fears, or the economy will remain resilient.
No one wants to buy pricier stocks already at records so some are praying for any selloff as an excuse to buy.
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