Investment firm Ned Davis Research is going even further as the sliding stock market shows little sign of slowing. Tim Hayes, the firm’s chief global investment strategist, said in a note to clients that after waiting to see if there would be a “breakout” or “breakdown” for the markets, the global fall in stocks made it necessary to put in more money. . Cash to ride out the storm. “The breakdown has now occurred, so we are moving 5% from stock to cash, becoming more in line with the equity allocation recommended by our Global Balanced Account Model. Our fourth equity downgrade of 2022, this move will reduce the allocation to 50% That leaves stocks (5% underweight), 30% bonds (5% underweight) and 20% cash (10% overweight),” Hayes wrote. The S&P 500 has fallen for nine of the past 10 weeks and officially entered a bear market on Monday, as sky-high inflation led the markets to prices at the more aggressive Federal Reserve. There has also been a sell-off in overseas markets, with the dollar rising and the war in Ukraine rippling through global economies. Hayes said there’s still a path where this pullback ends up as a tough patch for the stock over an otherwise strong long period. “The key question going forward is whether the secular bull market is still sustained, in which case historical averages suggest that stocks are nearing the end of the decline. While cyclical bears tend to be relatively mild and small during secular bulls. , they have generally been relatively long and severe during the secular bear,” Hayes wrote. This is the highest cash allocation for Ned Davis since 2009, when it was above 20%. Hayes said Ned Davis could further increase his cash position if things worsen. “While our base case is that inflation will peak soon and secular bulls remain intact, we will continue to reallocate from equities if the evidence continues to deteriorate,” he said.
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