Why are computer traders bullish while humans remain cautious in today's market?
ADVERTISEMENT Computer-guided traders haven't been this bullish on stocks compared to their human counterparts since early 2020, before the depths of the Covid pandemic, according to Parag Thatte, a strategist at Deutsche Bank AG.
The two groups look at different cues to form their opinions, so it's not a shock that they see the market differently. While computer-driven fast-money quants use systematic strategies based on momentum and volatility signals, discretionary money managers are individuals looking at economic and earnings trends to guide their moves. Still, this degree of disagreement is rare-and historically, it doesn't last long, Thatte said.
"Discretionary investors are waiting for something to give, whether that's slowing growth or a spike in inflation in the second half of the year from tariffs," he said. "As the data trickles in, their concerns will either be proven right if the market sells off on growth fears, or the economy will remain resilient, in which case discretionary managers would likely begin to lift their stock exposure on economic optimism."Wall Street offers a lot of confident predictions, but the reality is nobody knows what will happen with President Donald Trump's trade agenda or the Federal Reserve's interest-rate policy.With the S&P 500 Index hitting repeatedly hitting all-time highs, professional investors aren't sticking around to find out.
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