| Company | Value | Change | %Change |
|---|
“What keeps me up at night the most is this retail frenzy into euphoric stocks,” the senior portfolio manager and head of the applied equity advisors team said Wednesday in an interview on Bloomberg Television. “Euphoria is the tail end of a bull market, and we’re moving too quickly through the optimism phase.”
His remarks come with the S&P 500 Index brushing up against record highs despite ballooning risks — from tariff tensions to a Federal Reserve intent on keeping interest rates elevated for some time. Questions have also emerged around whether America’s largest companies can monetize heavy artificial intelligence spending.
Individual investors’ exposure to stocks is in the 96th percentile in data going back to 1997 as of the end of January, according to an analysis from Barclays’ equities tactical strategies division led by Alexander Altmann. Sentiment across that group has also reached the highest on record, surpassing levels seen during the meme-stock mania of 2021, according to Emma Wu, JPMorgan’s global quantitative and derivatives strategist.Meanwhile, the ARK Innovation ETF (ARKK), a proxy for profitless technology stocks, has gained roughly 20% over the past three months, while retail favorite Palantir Technologies Inc. has surged nearly 50% this year.
“The more that the Fed actually says we’re on hold, that lowers the temperature,” Slimmon said. “I’m happy if things calm down a little bit.”Despite his near-term worries, Slimmon isn’t capitulating altogether, and sees opportunities beyond the megacap technology behemoths that have driven equity gauges higher over the past two years. A rally in those names has faded early into 2025, with an index of the so-called Magnificent Seven stocks up 1.2% to start the year. One sector he likes is financials.
“I’m not betting against these stocks,” he said. “I do think it’s healthy for the market to see a broadening out.”
Slimmon has been on the right side of the S&P 500’s rally over the past two years, even calling for gains in 2023 at a time when most Wall Street prognosticators expected losses.
The Morgan Stanley money manager expects market swings to be the norm in 2025 after two straight years of double-digit returns in US stocks, since buyers who stepped into the bull market at elevated prices are more likely to hit the “panic button” and sell on any disappointments.
“That’s why you tend to get more volatility in the third year and why it’s a lower-returning year,” he said. “But I think the likelihood of deeper shocks lowers if we don’t get as much buying frenzy in these quantum AI-type stocks.”
