Are U.S. retail investors too complacent about U.S. equities? They’re certainly less cautious than large global institutional investors who are moving some of their investments out of the U.S. stock and bond markets, according to a new survey by market research firm CoreData. The survey polled 132 institutional investors around the world — think large pension funds, sovereign wealth funds, banks, real estate investment trusts, and the like, as opposed to everyday retail investors like many Cheddar readers. The survey showed that 49% said the markets are too complacent, and 56% hold a bearish view on U.S. equity markets over the next three months. By comparison, 66% of American retail investors are bullish or neutral on U.S. stocks over the next six months, and only 33% are bearish. So: Who’s right? Cheddar’s BBTW editor Peter Green spoke with CoreData’s Mike Morley about what the survey means.

What’s the big takeaway from the report?

Institutions outside of the U.S. are a lot more negative on the outlook for U.S. markets than U.S. investors are.

What is the big surprise here?

The big surprise is how much these investors are making changes directly in response to American policy. The fact that so many have made tactical short-term changes is interesting, but even more interesting is how many have made or are making strategic long-term allocation changes. It speaks to the fact that this isn’t just a short term blip in the markets and policy, but a lot of agreement that tariff policies are going to create a situation with slower growth and higher inflation, and a lot of risk, when you think about longer-term issues like the debt situation in the U.S. These are challenges that looked like they were 20 years in the future, but that are coming forward in investors’ eyes because of erratic and volatile U.S. policy.

So what’s been keeping the U.S. equity markets so high so far?

The reality is there’s just enough positivity from retail investors and from other corners of the market, which is holding up the prices at this point.

Your survey talks about institutional investors moving away from U.S. markets. How big is that move?

These changes that we’re talking about are not huge percentage-wise in the portfolio. If their range for U.S.equities was 30% to 32%, maybe they’re shifting it down to 28% to 30%. These are huge sums of money, but they’re not totally reshaping the portfolio, and it’s not something that they’re doing overnight, they take some time.

Who wins out of all of this?

Developed markets outside of the U.S. There is really strong sentiment around European equities, likewise for emerging markets. China is not looking so good. Investors based outside of the U.S. are saying that new U.S. policies are also accelerating a shift away from U.S. treasuries and the dollar, so that’s a pretty significant change. The beneficiaries of that are the Treasury alternatives like the German Bunds or Japanese bonds, and the dollar alternatives and other safe havens like gold, Swiss Francs, that sort of thing.

Does this mean the shine is off the U.S. apple?

It’s definitely a situation where the U.S. looks relatively unattractive in comparison to these other markets. In the timeframe that we looked at, a year out, in terms of equity expectations, it’s not that the U.S. is looking horrible, it’s just that these other markets are looking much more attractive, so it’s this relative performance conversation where there’s some rebalancing going on.

Long-term, what does this mean for U.S. retail investors?

I’m not a financial adviser, but it’s the classic advice of staying diversified and having diversified index exposure across lots of different facets of global markets. You don’t want to be over-exposed to the U.S.

—Peter S. Green

Watch Big Business This Week on Cheddar—and YouTube!Big Businesses Mentioned This Week

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What do you think of Big Business This Week? Tell us how you really feel in this survey!

The usual suspects

• They fiddled with the middle: Snack food giant Mondelez $MDLZ Z is stuffing the middle of its Oreo cookies with Hershey’s $HSY Reese’s Peanut Butter Cup filling, in a cross-corporate cooperation. Oreo is the top-selling U.S. cookie and Reese’s are (who’d a thunk it?) the top selling U.S. candy. In return, Reese’s will make peanut butter cups with white shells evoking the taste of that Oreo middle, and cookie crumbs in the peanut butterish center.
• Zuck’s big thoughts: After spending hundreds of millions of dollars to recruit some of the world’s best talent to his AI project, Facebook’s CEO Mark Zuckerberg wrote Meta $META employees a letter about the company’s AI vision, called “Personal Superintelligence.” It said “a new era for humanity” looms, and he wants to create a “personal superintelligence” controlled by individuals. “This is distinct from others in the industry who believe superintelligence should be directed centrally towards automating all valuable work, and then humanity will live on a dole of its output,” he wrote. “At Meta, we believe that people pursuing their individual aspirations is how we have always made progress.”
• $2B for Mars: No, not the planet. That’s much more expensive. The family-owned U.S. candymaker says it plans to invest another $2 billion in its U.S. factories, on top of the $6 billion it invested over the last five years. That means 94% of Mars candy and other products will soon be made in America.

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The quarterly tally

• Weight loss loss: Danish drugmaker NovoNordisk $NVO the company behind Wegovy and Ozempic saw its shares plummet 20% Tuesday when it said sales growth in the next quarter might be half of what had been expected, blaming competition from Eli Lilly’s $LLY Mounjaro and Zepbound, and patients using other cheaper compounded versions of GLP-1 drugs. Still, first-half sales were up 18% from a year earlier, and operating profit was up 29%.
• Starbucks is back? Or not? Markets are conflicted about what to make of Starbucks’s $SBUX much-vaunted new-ish CEO Brian Niccol. Shares in the firm rose 3% on Wednesday as the company released its second quarter results, showing the sixth straight quarterly drop in store sales. But the company’s shares are hewing reasonably closely to the major indexes over the last year and yet to show much tangible impact from Niccol’s hire. One analyst wrote that the results show a “potential recovery ahead”, including cutting 80-plus locations that only take mobile pickup orders because they lack what Niccol calls “warmth and human connection.” Niccol, meanwhile, also lacks human connection, working remotely from California and only occasionally showing up at the company’s headquarters in Seattle. His ironically named “Back to Starbucks” plan doesn’t include him going back to the office, apparently. And yet he makes 6,666 times the salary of the average barista, something that’s been garnering a lot of attention on social media this week.
• United Health woes continue: Health insurance giant UnitedHealth Group $UNH says its earnings will drop to almost half of what it had earlier predicted as costs rose faster than expected. It said it’s pricing in higher costs for next year, but shares are down more than 54% since mid-April, wiping almost a quarter of a trillion dollars from the firm’s market capitalization.
• Clippy takes home the bacon. Microsoft $MSFT reported strong quarterly earnings, driving its stock up 5% and briefly surpassing a $4 trillion market cap, becoming only the second company to hit this milestone after Nvidia $NVDA . The stellar results underscore AI-driven growth and investor confidence in the tech sector’s expanding infrastructure. Revenue hit $76.4 billion, well above the market’s expected $73.8 billion.

The short stack

• Christmas comes twice a year: Forget Black Friday. Many U.S. consumers are using summer sales to stock up on Christmas presents, the New York Times reports. Retailers are catching on to the trend: Amazon $AMZN N extended its summertime Prime Day Sale to four days, and Macy’s now has a five-day Black Friday in July event. What next? Santa trading his boots for flipflops?
• Car talk: The luxury car market is suffering. Mercedes-Benz $MBGAF and Porsche $POAHY both reported a hit to their earnings, blaming U.S. tariffs of 27.5%, which will soon drop to 15% under the latest tariffs agreed with the E.U., and a massive sales drop in China — of more than 30% for Porsche.
• All the slop that’s fit to print: The New York Times $NYT seems to be making peace with AI. In a deal annoucned this week, the company says it will license its news, cooking and sports content to Amazon for $25 million a year. That’s about 1% of the Times’ 2024 revenue. The Times is one of several papers suing OpenAI for using its content to train its chatbots, but the deal sets a standard for pricing content for AI use. OpenAI is paying Wall Street Journal’s parent News Corp up to $250 million over five years for access to its content.
• Big cybersecurity deal: Cybersecurity giant Palo Alto Networks $PANW said it has agreed to pay almost $25 billion for an Israeli identity security provider called CyberArk $CYBR. CyberArk makes software that controls employee access to platforms and applications, competing with Microsoft $MSFT and Okta $OKTA. Under CEO Nikesh Arora, Palo Alto has grown to a market cap of $120 billion. This year, Palo Alto bought startup Protect AI for an undisclosed amount to improve its AI tools. In 2023, it bought Talon Cyber Security, Dig Security and Zycada Networks. As tech hacks grow in sophistication, cybersecurity is a blooming business. In March, Google parent Alphabet $GOOGL paid $32 billion for cloud security startup Wiz, its biggest ever acquisition. Palo Alto shares dropped 8% on the announcement but have since recovered about 3 points of that drop.
• The rent is too damn low? Apparently so. According to a survey by Apartment List, the median U.S. rent was down 0.8% from last June, and was in July from this June, at $1402 across the U.S. That’s probably because of new construction that added 600,000 multi-family units to the market last year, helping to push the nationwide vacancy rate up to 7.1%. But if all of this sounds a little off key in your hood, remember that’s because there are three keys to real estate: Location, location and location.

The short stack

• Christmas comes twice a year: Forget Black Friday. Many U.S. consumers are using summer sales to stock up on Christmas presents, the New York Times reports. Retailers are catching on to the trend: Amazon $AMZN N extended its summertime Prime Day Sale to four days, and Macy’s now has a five-day Black Friday in July event. What next? Santa trading his boots for flipflops?
• Car talk: The luxury car market is suffering. Mercedes-Benz $MBGAF and Porsche $POAHY both reported a hit to their earnings, blaming U.S. tariffs of 27.5%, which will soon drop to 15% under the latest tariffs agreed with the E.U., and a massive sales drop in China — of more than 30% for Porsche.
• All the slop that’s fit to print: The New York Times $NYT seems to be making peace with AI. In a deal annoucned this week, the company says it will license its news, cooking and sports content to Amazon for $25 million a year. That’s about 1% of the Times’ 2024 revenue. The Times is one of several papers suing OpenAI for using its content to train its chatbots, but the deal sets a standard for pricing content for AI use. OpenAI is paying Wall Street Journal’s parent News Corp up to $250 million over five years for access to its content.
• Big cybersecurity deal: Cybersecurity giant Palo Alto Networks $PANW said it has agreed to pay almost $25 billion for an Israeli identity security provider called CyberArk $CYBR. CyberArk makes software that controls employee access to platforms and applications, competing with Microsoft $MSFT and Okta $OKTA. Under CEO Nikesh Arora, Palo Alto has grown to a market cap of $120 billion. This year, Palo Alto bought startup Protect AI for an undisclosed amount to improve its AI tools. In 2023, it bought Talon Cyber Security, Dig Security and Zycada Networks. As tech hacks grow in sophistication, cybersecurity is a blooming business. In March, Google parent Alphabet $GOOGL paid $32 billion for cloud security startup Wiz, its biggest ever acquisition. Palo Alto shares dropped 8% on the announcement but have since recovered about 3 points of that drop.
• The rent is too damn low? Apparently so. According to a survey by Apartment List, the median U.S. rent was down 0.8% from last June, and was in July from this June, at $1402 across the U.S. That’s probably because of new construction that added 600,000 multi-family units to the market last year, helping to push the nationwide vacancy rate up to 7.1%. But if all of this sounds a little off key in your hood, remember that’s because there are three keys to real estate: Location, location and location.

Rest in peace, Jimmy McMillan.

Trumplandia

• Fed stays steady: Jerome Powell showed he and the Fed’s Open Markets Committee are not afraid of Donald Trump, voting once again to leave interest rates untouched, as they noted a mixed report on GDP growth and continued fears that the tariffs will destabilize the U.S. economy. Powell said continued uncertainty about the direction of the economy meant rates wouldn’t change, but he did not rule out a rate cut in September, which Trump has been pushing for. Two Fed governors, both named as angling to replace Powell when his term expires next year, voted to cut rates by a quarter or of a percent. Powell said the Fed must guard its independence and stay focused on the data.
• A novel legal strategy, “the other guy might die soon”: Lawyers for Download Trump (age 79) asked for court permission to depose Wall Street Journal and Fox owner Rupert Murdoch (age 94) because of Murdoch’s age and health, on the basis that he might die soon. Trump’s lawyers said Murdoch may “not be able to testify” by the time a trial comes around on their allegation that the Journal defamed Trump when it published an article about a lewd poem and drawing Trump wrote to the late convicted sex offender Jeffrey Epstein. The Journal has stood by its reporting.
• Tariff talk: Remember Peter Navarro, Trump’s trade adviser who promised 90 trade deals in 90 days? Navarro’s been keeping a low-profile lately, and now Trump says he doesn’t need any negotiations. Instead he’ll slap tariffs of either 10% or 20% on everyone, and a few countries will get hit harder. Why no new global trade talk? “Because you can’t sit down and make 200 deals,” Trump said in Scotland on Monday. Meanwhile, he announced a few exceptions. India will get hit with 25% tariffs because they have the most “obnoxious non-monetary Trade Barriers of any Country,” Trump wrote on Truth Social. He said India will also be punished for buying oil and weapons from Russia. Last week, Trump announced 15% tariffs on Japan, and on Sunday, 15% tariffs on most European goods. Brazil got hit Wednesday with 50% tariffs on many goods, since Pres. Luis Ignazio Lula de Silva has refused to pardon predecessor Jair Bolsonaro, who’s on trial for plotting a coup after losing the 2022 presidential elections.