Why The 1% Is Still Cautious About This Market

The potential for a “great rotation” out of bonds and into stocks and the prospects for a favorable earnings environment in the United States in the coming years has many investors, including President Donald Trump, bullish on stocks. However, some of the wealthiest investors in the world still see plenty of reasons for caution.

Trump’s political unpredictability along with potential destabilization in Europe following the Brexit vote are two reasons Deutsche Bank AG CIO Christian Nolting believes wealthy investors remain uneasy.

“People are still cautious; there is still demand for bonds and people are not ready to move into the more risky equity space,” Nolting said.

Analysts at Citigroup and Goldman Sachs recently questioned the existence and potential impact of the great rotation.

“I, like many people, worry that there’s too much comfort right now and maybe some uncertainties are underestimated, particularly political ones, and as we get closer to some of those moments you’re likely to see spikes in volatility,” Credit Suisse Group CEO Tidjane Thiam explained. He predicts an uptick in market volatility in the near future.

Trump’s plans for lower corporate taxes and fewer regulations seem to present U.S. stocks with the best opportunity for growth that they’ve had in years. So far, the SPDR S&P 500 ETF Trust SPY is up 9.5 percent since Election Day. However, nothing is ever a sure thing when it comes to investing, and the 1 percent it far from comfortable.