The Biggest Investors Are Selling Stocks Right Now, Yet S&P 500 Notches Best 3-Day Streak In 7 Months - Should You Buy?

Zinger Key Points
  • California's CalPERS reduces stock allocation from 42% to 37% in its $494 billion fund, signaling a cautious approach.
  • Fed's dovish stance and a subdued April jobs report fuel market optimism, leading to a strong start in May with a 3.2% rise for the S&P 500.

Major U.S. pension funds are making noticeable shifts in their investment allocations, moving away from equities and increasing their stakes in private equity and real estate.

Notable among these is the California Public Employees' Retirement System (CalPERS), which manages pension and health benefits for over 1.5 million California public employees, retirees, and their families.

In a significant move, the CalPERS board decided in March to decrease its stock allocation from 42% to 37% of its $494 billion fund.

Similarly, the New York State Common Retirement Fund, valued at $260 billion and serving police, firefighters, and other public workers, also reduced its equity exposure from 47% to 39%, as reported by The Wall Street Journal.

Stocks Rebounded After April’s Volatility

The S&P 500, as tracked by the SPDR S&P 500 ETF Trust SPY, experienced a downturn in April 2024, falling over 4%, which marked its worst month since September 2023.

This decline included a drop below its 50-day moving average—a technical indicator closely watched by market analysts — which raised concerns among investors about the end of the bull run started in late October 2023.

However, early May has shown signs of recovery, spurred by the Federal Reserve’s softer-than-expected stance on interest rates despite recent high inflation readings.

Fed Chair Jerome Powell‘s latest remarks pushed back fears of potential rate hikes, providing a huge relief to risk assets.

Moreover, a cooler-than-expected April jobs report has reignited speculation about potential Federal Reserve rate cuts, with the market now anticipating approximately 50 basis points of cuts (two cuts by 25 basis points) by the end of the year.

Following these developments, the S&P 500 surged 3.2% in the first four sessions of May, notching on Monday a three-day winning streak—the strongest since November 2023.

Chart: S&P Notches Strongest 3-Day Streak In 7 Months As Bulls Remain In Control

Read now: Sell In May And Go Away: Does The Trading Strategy Hold Up In Election Years?

Photo: Shutterstock

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