Wall Street investors are bullish on stocks heading into the fourth quarter, but they are concerned about a second coronavirus wave, according to a new CNBC survey.
As a part of CNBC's Quarterly Report, we polled dozens of investors, traders and strategists about where they stood on the upcoming quarter for stocks and the potential election impact.
Nearly half (46%) of respondents said the S&P 500 will rise in the final quarter of 2020. This follows the fastest bear market and subsequent rebound in history, with the 500-stock average notching an all-time high within six months of its March low.
A third of respondents see increased volatility ahead, but only 9% expect the S&P 500 to fall into year end.
Amid an uptick in coronavirus cases in places like New York, more than 60% of respondents said a second Covid-19 wave is their biggest concern for stocks. About 30% said a slow economic recovery and just 12% said election uncertainty was their biggest fear.
Investors are focusing on the outcome of the 2020 election between President Donald Trump and Democrat Joe Biden. Nearly 70% of respondents said Trump will be better for the stock market, while 33% said a Biden victory would boost equities.
Wall Street generally sees Trump as more pro-business but doesn't like his volatile relationship with China. Some investors take issue with Biden's plan to raise corporate taxes and tighten regulation.
Heading into the election, more than half of the Wall Street pros said they are rotating into cyclicals, stocks that would benefit most from an economic comeback. A quarter of respondents are sticking with the technology winners, 13% are taking profits and 9% are loading up on cash.
But Wall Street overall is still bullish on Big Tech, with 63% of respondents saying the FAANG (Facebook, Apple, Alphabet, Netflix and Google) leaders will continue to lead in coming months. More than half of respondents said they are buying technology stocks after the Sept. 2 drop. Thirty-seven percent see technology stocks losing their leadership spot in the fourth quarter and 44% said the technology weakness is not over.
Heading into 2021, the majority of the group said technology, industrials and consumer discretionary will be the biggest winners. Energy, utilities and real estate were the most popular laggards in the group.
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