May 14, 2021 - Economy

Stock market bulls keep shrugging off bad news

Data: Boston Consulting Group; Chart: Sara Wise/Axios
Data: Boston Consulting Group; Chart: Sara Wise/Axios

Just over half of investors (53%) are bullish on the S&P 500 over the next three years — even as the index sits at or near record levels, according to a bi-weekly sentiment survey released Thursday by Boston Consulting Group.

Why it matters: Strength in long-term market views was on full display over the past week, as stocks largely shrugged off seemingly negative data.

  • Major indexes had muted reactions to last Friday’s disappointing jobs numbers, the Colonial Pipeline cyberattack and higher-than-expected inflation data.

Yes, but: In the shorter term, many say they're slightly less optimistic than they had been. About 47% have a bullish view of the S&P 500 in 2022, down from 57% who held that view in July of last year.

  • The shrinking bullish contingent reflects the fact that valuations have expanded rapidly and the economic rebound is more priced in, Hady Farag, BCG partner and associate director, tells Axios.

Meanwhile, the economic recovery has shifted expectations for corporate behavior.

  • Just 54% think it’s important for healthy companies to focus on preserving liquidity, the lowest reading in the survey’s history. The high was 79% in April 2020.
  • And 56% believe companies should quickly access all available sources of debt financing, also a record low. It was at 73% last April.

On the flip side: More investors are now comfortable with companies maintaining dividends and doing share repurchases.

  • They also have lower tolerance for companies not meeting (or even providing) earnings guidance.
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