LIVE MARKETS-Cash gets more favor, equities and small caps less so at Truist

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CASH MORE FAVOR, EQUITIES AND SMALL CAPS LESS SO AT TRUIST

Truist Advisory Services is downgrading equities and small caps while upgrading cash as markets still near record highs and "the near-term risk/reward appears more mixed" even though "recession risks remain relatively low."

Keith Lerner, co-chief invstment officer and chief market strategist at Truist, said the firm changed equities to a 'neutral' benchmark weighting from 'attractive' and downgraded small caps from 'neutral' to 'less attractive' while upgrading cash to 'neutral' from 'less attractive.'

Lerner pointed to a "modest deterioration in earnings, technical, and economic trends", warranting a more neutral equity posture and slightly higher cash.

While the S&P 500 hit an all-time high last week he saw weaker market participation with just 52% of stocks above 50-day moving averages "indicating only about half of stocks are in intermediate price uptrends."

And only 58% are above their 200-day moving averages, which is below 2024 levels for the most part, Lerner wrote.

And with expectations going into 2025 "much higher relative to the depressed outlook entering 2024", he says "the bar for positive surprises has been lifted at a time of increased near-term uncertainties."

Also, he notes that the U.S. Citi Economic Surprise Index turned negative for the first time since September.

"In the short term, tariff ambiguity is causing a degree of uncertainty, evidenced by weaker trends in consumer confidence and the PMI services index moving to a two-year low," writes Lerner.

But still, he sees "potential for pent up demand to provide an upside jolt to the economy later in the year" with the idea being that investors will have more clarity on new policies. And he sees "a shift in focus to the potential of tax cut extensions, deregulation, and Federal Reserve (Fed) rate cuts."

(Sinéad Carew)

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