Stock investors are high on hope and low on cash

{"text":[[{"start":3.55,"text":"What could bring the party in US stocks to a close? The S&P 500 has shrugged off a war, inflation fears, poor results from consumer companies and much else besides, mostly on the strength of the country’s tech giants. One extra thing to worry about, though, is that anyone with any cash appears to have ploughed it into the stock market already."}],[{"start":26,"text":"Two closely followed surveys from Bank of America show that institutional investors just notched up their biggest monthly drop in cash allocations for two years and their biggest leap ever in allocations to equities. Cash now makes up 3.9 per cent of their assets. Private clients — individuals with at least $3mn in investable assets, for whom the US bank manages $4.5tn — have less than 10 per cent of their assets in cash, too. That is the lowest since the survey began."}],[{"start":57.75,"text":"In part, this looks like a response to expectations of rising inflation. Bonds aren’t a great place to be if money tomorrow will be worth less than money today. Allocations to debt are at a record low among rich individuals and a four-year low among institutional investors. Having piles of cash on hand doesn’t work as an inflation hedge either. Equities, on the other hand, are relatively shielded if inflation is caused by red-hot demand, or if demand for products and services holds up despite rising prices."}],[{"start":89.65,"text":"Here, then, is the rub. US consumption is disproportionately propped up by the wealthiest. The idea that they are faring better than others, making spending data look healthier than it feels for the vast majority of the population, is a phenomenon dubbed the K-shaped economy. BofA’s survey, however, suggests that the wealthiest have their cash tied up in equities. Should the stock market falter, even they might pull in their horns, leaving US consumer spending in hot water."}],[{"start":null,"text":"

"}],[{"start":120.7,"text":"There is plenty of opportunity for minor and major snafus. On Wednesday Nvidia, at $5.4tn the world’s biggest company by market value, reports earnings — an increasingly important event given so many other large tech companies now ride on its coattails. The so-called Magnificent 7 make up about one-third of the S&P 500’s market capitalisation."}],[{"start":145.7,"text":"Should the wealthiest snap their wallets shut, it could further compress the value of those companies in the stock market that actually have to produce cash flows to justify their share price, such as consumer goods and services, or big-ticket items like automobiles. That would leave the S&P 500 even more reliant on AI-driven companies whose value is tied up in the far future, making for an even more fragile rally."}],[{"start":172.04999999999998,"text":"Investors, doubtless, are tired of hearing that the stock market party could soon be over. Then again, their continued rush into equities suggests that those with real money at their disposal are not really listening."}],[{"start":191.09999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779261734_8680.mp3"}