Federal Reserve Chairman Jerome Powell isn't the only market player who may be guilty of a little capitulation.
Millionaire investors began 2019 with major reservations about the stock market, but as the Federal Reserve's abrupt about-face on interest rates takes hold as the new normal in monetary policy, the wealthy have decided that the stock market rally will continue.
An E-Trade Financial survey of investors who manage $1 million or more in a self-directed brokerage account shows that the majority expect stocks to continue rising in the second quarter. In Q1 only 44% of millionaires said they were bullish; now that figure is up to 66%. In Q1 only 45% of millionaire investors said stocks would rise. Now, after the huge surge in stocks through the end of the first quarter, 62% of millionaire investors think stocks will continue higher through the second quarter. Only 15% think stocks will fall, down from 36% in Q1.
The VIX — the market's volatility barometer — which had spiked by more than 150% in 2018, hit its lowest level since October this week.
When the Fed's began signalling that its view on further rate hikes could change, stocks were just beginning to rebound from huge fourth-quarter losses, and that was still fresh in the minds of investors, said Mike Loewengart, chief investment officer at E-Trade Capital.
"Fed policy is one of the key risks, obstacles to further gains, and it is no secret there is political pressure on the Fed in a public manner," Loewengart said. But he added it would be wrong to think the Fed's shift was all about President Donald Trump's tongue-lashing. "I don't think we can discount weakness in the data and weakness in data that they have traditionally looked at."