Shifting Tides on Wall Street: Why the Retreat of Market Skeptics Should Be Your Signal to Worry

There’s a curious trend afoot on Wall Street, one that may be a harbinger of things to come. After months of surprisingly resilient market performance, a capitulation among the bearish big-name investors has begun to emerge. This change in tune comes just as the market has started to falter. The timing and nature of these developments should warrant concern for those paying attention to the financial markets.

Shifting Tides on Wall Street: Why the Retreat of Market Skeptics Should Be Your Signal to Worry

The Changing Tide: Bears Retreating

The June and July short-covering among Goldman Sachs’ hedge fund clients has been the most significant over a two-month period in the past seven years, according to The Wall Street Journal. Notable investors are either shuttering their bearish bets or moderating their negative views.

For instance, Morgan Stanley’s strategist Mike Wilson, widely criticized for his pessimistic market outlook, has turned less bearish. Carl Icahn, the famous activist investor, has shifted his stance as well. In a recent letter to Icahn Enterprises’ investors, he pledged to reduce his emphasis on hedging stocks and to focus more on activism, stating, “Activism is the best investment paradigm.”

These moves may elicit some schadenfreude from market watchers, but such a reaction could be misguided, especially for those who were fortunately positioned for the 2023 rally.

Earnings Concerns: The Warning Signs

This capitulation coincides with a subtle but important shift in the market’s narrative. Investors are becoming increasingly worried about slowing corporate earnings. Oppenheimer’s John Stoltzfus has recently reported that S&P 500 companies’ earnings seem weaker than expected, down 7.8%, compared to a predicted decline of 6.4%.

Other concerning signs include Fitch’s recent downgrade of the U.S. debt rating, Moody’s downgrading of 10 regional banks, and the 10-year Treasury yields rising above 4%. The latter is historically harmful for technology stocks, primarily due to the adverse impact of higher interest rates on the discounted-cash-flow models used to value these stocks.

The Looming Threats: Real Estate and Recession

Moreover, the unsettling troubles brewing in the real estate sector, coupled with uncertainty regarding recession odds, could spell financial unrest. These factors are the ingredients for a perfect storm of financial indigestion.

The Prudent Approach: Consider Hedging

If you find yourself in agreement that the market narrative is indeed changing and are concerned that the bearish sentiment is prematurely fading, it may be wise to consider protecting the impressive gains of 2023. Hedging expenses are still reasonable, with the Cboe Volatility Index (VIX) remaining below its long-term average of 19.

As suggested by Michael Schwartz, Oppenheimer’s chief market strategist, buying three S&P 500 November $4450 put options to hedge a $1 million portfolio could be a strategic move. If the market falls 10%, this hedge would offset about 95% of any losses.

Timing and Caution

It is worth noting that most bullish investors tend to wait to hedge or lock in profits until panic sets in. The end of summer will bring several events that could prompt investors to sell stocks, including major market declines typical of the September and October trading months, Federal Reserve meetings, and vital economic data parsed for inflation clues.

Should stocks rally into the fall, money spent hedging will be lost, but that’s a risk that could be considered well worth taking in these uncertain times.


The shift in the investing world from bearish skepticism to something akin to complacency should be viewed with caution rather than celebration. The convergence of declining corporate earnings, credit rating downgrades, the threat of higher interest rates, and potential real estate troubles signals a changing tide.

Investors who act prudently, with a keen eye on hedging strategies, may find themselves better positioned to navigate the uncertain waters ahead. Remember, the market’s skeptics are giving up; it might just be time to worry.,This article is an original creation by If you wish to repost or share, please include an attribution to the source and provide a link to the original article.Post Link:

Like (1)
Previous August 8, 2023 10:37 pm
Next August 10, 2023 1:33 pm

Related Posts

  • Unearthing Opportunities: A Comprehensive Guide to Rare Earth Elements and Investment Prospects

    Introduction to Rare Earth Elements Rare earth elements (REEs) are a set of 17 metallic elements found in the Earth’s crust, comprising 15 lanthanides along with scandium and yttrium. Despite their name, these elements are not necessarily rare but are found in low concentrations and are difficult to extract due to their geological dispersion. REEs are essential for various high-tech industries and green energy technologies, making them a critical resource in the global economy. Applications of Rare Earth Elements REEs play a vital role in numerous applications, including: Electronics: REEs…

    April 7, 2023
  • 5 Steps to Investing in Mutual Funds

    Mutual funds can be an excellent way to invest in the stock market without having to spend hours researching individual companies. With a mutual fund, you can purchase a diversified portfolio of stocks and other investments with a single transaction. Here are five steps to get started with investing in mutual funds. Step 1: Determine Your Investment Goals The first step in investing in mutual funds is to determine your investment goals. Are you investing for retirement, a down payment on a house, or just to grow your wealth? Knowing…

    February 11, 2023
  • Investing in the Future: An Introduction to Artificial Intelligence and the Top 5 AI Stocks

    Introduction Artificial Intelligence (AI) has become an integral part of our daily lives, with its applications spanning various sectors such as healthcare, finance, manufacturing, and transportation. As AI technology continues to advance, it’s becoming increasingly clear that investing in AI can yield significant returns. In this article, we’ll introduce Artificial Intelligence, discuss the opportunities of investing in AI, and explore the top 5 AI stocks to consider for your investment portfolio. What is Artificial Intelligence? Artificial Intelligence is the development of computer systems capable of performing tasks that typically require…

    March 24, 2023
  • An Introduction to Free Options Strategies: Unlocking the Potential of Options Trading for Beginners

    Introduction Options trading offers a unique way for investors to diversify their portfolios and potentially maximize profits. This blog post aims to introduce the concept of options, the reasons to invest in options, the advantages and disadvantages of options trading, how to get started with options, and common options strategies for beginners. We will also discuss what options can be used for, who can benefit from options trading, and provide a conclusion to tie everything together. What are Options? Options are financial contracts that give the buyer the right, but…

    April 26, 2023
  • What is a SPAC and How Does it Work?

    A SPAC, or special purpose acquisition company, is a type of publicly traded investment vehicle that is created for the sole purpose of acquiring or merging with a private company and taking it public. SPACs are also known as “blank-check companies” because they raise money from investors through an initial public offering (IPO) without specifying which company they plan to acquire. Once a SPAC has raised enough money through its IPO, it has a certain period of time (usually two years) to identify and complete an acquisition or merger with…

    March 3, 2023
  • Buy The Dip & Sell The Rip: A Beginner’s Guide To Stock Market

    Investing in the stock market can be a great way to make money, but it can also be quite daunting for those who are new to it. But don’t worry – this article will give you an introduction to the basics of ‘Buy The Dip & Sell The Rip’ strategy, so that you can start making money from the stock market with confidence! Introduction: What is ‘Buy The Dip & Sell The Rip’? Buy the dip and sell the rip is a stock market strategy that involves buying shares of…

    February 11, 2023
  • Rising Underdogs: The Unstoppable Surge of Small-Cap Stocks in 2023

    The financial universe of 2023 has been dominated by tales of tech titans and the eye-watering growth of mega-cap stocks. With around ten of these giants responsible for the meteoric rise of the S&P 500® Index in H1 2023, it’s easy to think they’re the only show in town. But beneath the surface of these headline-grabbers lies an intriguing tale of smaller players – the small-cap stocks – preparing to take the lead. Is Narrow Leadership Fading? While mega-cap stocks had their moment in the spotlight, market analysts predict a…

    August 24, 2023
  • 3 Things to Watch for if a Bull Market is Coming in 2023

    It’s no secret that stock, bond, gold, and silver markets have been on a roller coaster ride in recent months, leaving investors with plenty of uncertainty. Despite the current market volatility, many experts are forecasting a potential bull market in 2023. If you’re a long term investor or looking to capitalize on a potential bull market, here are 3 things you should watch for in the coming months. Analyzing Past Bull Markets In order to better assess the potential for a bull market in 2023, it’s important to analyze past…

    January 21, 2023
  • Stocks Surge as Cooling Inflation Quells Market Jitters: Weekly Roundup

    The S&P 500 brushed near its highest level since April 2022 on Friday, as calming inflation data invigorated the stock market, encouraging widespread optimism among investors. However, the index registered a slight decline on the day, as the quarterly earnings report from major banks underscored the resilience of the economy, although top executives did not rule out the possibility of a recession. The Dow Jones Industrial Average and the tech-centric Nasdaq Composite witnessed their best weeks since March, appreciating 2.3% and 3.3% respectively. The S&P 500 also displayed a robust…

    July 14, 2023
  • 5 Best REIT ETFs for 2023

    REIT stands for Real Estate Investment Trust, it’s a type of investment vehicle that invests in income-generating real estate properties, such as apartments, office buildings, hotels, and shopping centers. REITs provide investors with a way to invest in real estate without having to directly own or manage properties. There are several reasons to invest in REITs, including: Diversification: REITs provide a way for investors to diversify their portfolios and reduce their overall risk. Regular income: REITs often pay regular dividends to their investors, providing a steady stream of income. Access…

    January 30, 2023

Leave a Reply

Your email address will not be published. Required fields are marked *