NYSE trader: Trade uncertainty still rattling markets

NYSE trader Jonathan Corpina tells CNNMoney's Richard Quest why concerns about trade with China and inflation are causing investors to take a step back.

Posted: Apr 26, 2018 5:01 AM
Updated: Apr 26, 2018 5:01 AM

Main Street's confidence in the stock market is crumbling at the fastest pace since at least 1987.

Americans remain optimistic about the economy, but their attitude toward stocks has gone from euphoric to negative as turbulence has rocked Wall Street.

Just 33% of people polled by the Conference Board this month expected stock prices to rise over the next year.

That's down dramatically from a record high of 51% who were bullish in January, back when the Dow was zooming beyond 26,000.

Since the market peaked in late January, though, fears about inflation and trade wars have driven the Dow down more than 2,500 points. Stocks tumbled again this week because of concerns about the resiliency of corporate earnings and soaring bond yields.

The sudden shift in confidence in the market is the fastest swing since the Conference Board began keeping track in 1987, according to Bespoke Investment Group.

"Investors were way too confident — they seemed to see only the positive aspects of the Trump administration's agenda," said Kristina Hooper, global market strategist at Invesco. "This is a case of Icarus flying too close to the sun."

More recently, President Trump's aggressive use of tariffs and attacks on Amazon have rattled an already wobbly Wall Street.

"Investors' eyes seem to finally be wide open," Hooper said.

Related: 10-year Treasury hits 3% for first time since 2014

Just 20% of Americans polled by the Conference Board, a business research association, were negative on the stock market in January. Now one-third are bearish. April was also the first month since President Trump's election when more people were negative than positive on stocks.

"At the end of last year, we were in this feel-good area. Nothing could knock the market off its perch," said JJ Kinahan, chief market strategist at Ameritrade. "Now that there is risk back in the market, people are more suspicious."

The S&P 500 has moved up or down at least 1% on 30 trading days in 2018. Compare that with 2017, when it only happened eight times all year.

TD Ameritrade's own research shows that everyday investors have rapidly soured on the market. The company's Investor Movement Index, which measures investor activity, has declined every month this year after hitting a record high in late 2017.

One factor that Kinahan said could be at play: Investors may be overreacting to point drops on the Dow that sound scarier than they really are. The Dow is so high that even a 100-point decline represents a loss of less than half a percent.

"Ten years ago, 500 points was 'hide the women and children.' Now, it's 2%," Kinahan said.

Even professionals have become more cautious, though. Fifty-eight percent of global money mangers surveyed by Bank of America Merrill Lynch think the stock market has already peaked or will peak later this year.

Related: Billionaire investor: It's time to short Facebook

Regardless of the driver, is the loss of confidence in stocks an ominous sign for the nine-year-old bull market?

Maybe not. The whims of average investors don't typically signal doom for the market. In fact, the opposite is often true: They are bullish when they should be cautious, and vice versa.

When confidence in the market drops sharply over three months, the S&P 500 goes up an average of 22% over the next year, Bespoke Investment Group found.

The most recent example was in 2011, during the debt ceiling showdown and downgrade of America's AAA credit rating.

The S&P 500 dropped 7% in September 2011. But it quickly stabilized, and a year later, it was up a solid 15%. Likewise, one year after a collapse in confidence in the spring of 1997, the S&P 500 had surged 39%.

Negative consumer sentiment on stocks, according to Bespoke, is a "pretty reliable contrarian signal over time."

Minnesota Coronavirus Cases

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Reported Deaths: 7309
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Hennepin1214151720
Ramsey50647870
Dakota45309445
Anoka41050434
Washington26510280
Stearns22001221
St. Louis17598302
Scott17081124
Wright15800137
Olmsted1314197
Sherburne1149085
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Clay809992
Rice7978106
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Kandiyohi649182
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Benton562397
Goodhue473572
Mower462532
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Itasca424353
McLeod419158
Morrison415460
Isanti412563
Nobles407048
Beltrami389458
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Becker376950
Lyon358750
Carlton341453
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Pine325121
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Brown303840
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Pope10876
Murray10609
Swift104518
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Cook1560

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 365306

Reported Deaths: 5923
CountyCasesDeaths
Polk57333622
Linn20748334
Scott19856240
Black Hawk15765308
Woodbury15097228
Johnson1442583
Dubuque13333209
Dallas1112998
Pottawattamie11060168
Story1056248
Warren574288
Clinton552492
Cerro Gordo536989
Sioux512974
Webster511193
Marshall481375
Muscatine475399
Des Moines452366
Wapello4286122
Buena Vista424040
Jasper417271
Plymouth400380
Lee373855
Marion360775
Jones297257
Henry290837
Carroll285052
Bremer283260
Crawford265940
Boone263234
Benton255455
Washington253550
Dickinson247643
Mahaska229451
Jackson220942
Kossuth215164
Clay214925
Tama209071
Delaware208240
Winneshiek196833
Page192522
Buchanan190531
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Hardin184843
Fayette184741
Wright183936
Hamilton179249
Harrison179173
Clayton169256
Butler164334
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Madison160819
Floyd160042
Cherokee158438
Lyon157541
Poweshiek154733
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Iowa148224
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Cass137854
Calhoun136913
Grundy136133
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Jefferson132235
Shelby130537
Sac130019
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Louisa127849
Mitchell125742
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Monroe95129
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Davis82324
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