The Most Crowded Bull Market in History?
Today’s chart is one for tomorrow’s history books.
It shows US households running the highest allocation to equities on record (and [as a result] the stockmarket trading at record high valuations).
This is the type of shift you see only once in a generation, and it means a fundamental change in market structure with significant implications for the economy, politics, and the forward looking risk vs return outlook.
But to be fair, with the S&P500 gaining more than 10x off the March 2009 lows — it’s an entirely understandable development!
And even though it got this way for very logical reasons (strong earnings growth, waves of tech disruption, low interest rates, passive flows), it’s important to acknowledge that this is not normal and we live in highly unusual times.
Investor confidence is near record highs, earnings optimism is at euphoric levels, defensives and diversifiers are in the dustbin, and social media chatter is saturated with an almost desperate sense of greed (with investors growing accustomed to 2x, 3x, 10x returns, and the bull market minting many geniuses).
This is the speculation generation.
p.s. this is neither good nor bad, it’s just a thing… and that’s the thing: as market analysts we ought to not got get bogged down in good or bad, bullish or bearish, optimism or pessimism —but rather what is the lay of the land? what does the data tell us? and what are the most pragmatic next steps we should take (or prepare to make…)
$SPDR S&P 500 ETF Trust(SPY)$ $S&P 500(.SPX)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$ $iShares Russell 2000 ETF(IWM)$
Bottom line: a generational shift in investor behavior has been observed.
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