Wall Street's mixed message

How bullish should you really be right now?

The S&P 500 is up 23% over the past 12 months, the chances of rate cuts are shrinking by the minute, and the geopolitical landscape has question marks all over it.

Retail investors and professional money managers are looking at the same facts—but coming to starkly different conclusions.

According to the latest survey from the American Association of Individual Investors, 47% of the investors surveyed expect stock prices to fall over the next six months—the highest reading since November 2023. Investors pointed to uncertainty about domestic policy such as tariffs and overvalued tech stocks as some of the reasons for their bearishness.

But while the retail crowd is pessimistic, institutional players—which include professional money managers like hedge funds—are all-in. In fact, the so-called “smart money” is more bullish on stocks than it has been in over a decade.

According to Bank of America’s latest global fund manager survey, the pros reported that their cash levels were at their lowest since 2010. To them, things look rosy for the global market: Recession fears among the group surveyed are at a 3-year low, and over half of the fund managers expect a soft landing.

While the “Mag 7” stocks are still the most popular trade among the professional investors, they’re now foreseeing global equities to be the best performing trade of 2025 (more on that later in this newsletter).

He’s called the oracle for a reason

So, who’s right? Nobody has a crystal ball, and the consensus among the biggest Wall Street names is that there are still plenty of reasons to believe that stocks will keep rallying even through a topsy-turvy policy environment.

But one voice that has earned some credibility for being contrarian is none other than Warren Buffett himself. The Oracle of Omaha is feeling more fearful than greedy, and holding on tight to his cash. According to a recent regulatory filing, Berkshire Hathaway sold about $6 billion worth of stocks last quarter, adding to the conglomerate’s $310 billion pile of cash.

With valuations still historically high, there’s good reason to wonder how much higher stocks can climb. But the market is often all too happy to defy bearish logic: as John Maynard Keynes once said, “The markets can remain irrational longer than you can remain solvent.”—LB