Well, this is probably not what you want.
People went toe in the water, knee in the water and now many are probably above the waist for the first time.
That’s from JJ Kinahan, chief market strategist at TD Ameritrade and he’s talking about TD’s Investor Movement Index, which just hit a fresh high in data going back to 2010.
As WSJ notes, “the index tracks investors’ exposure to stocks and bonds to gauge their sentiment.” And by “investors”, they mean retail investors. Have a look at this mad dash into equities:
That’s right, folks. Retail is all-in like never before. We’ve literally never seen “dumb” money inflows this strong.
But it’s not just retail money. I’ve noticed over the past couple of days that some commentators are cherry-picking the latest CFTC data which, as Bloomberg notes, shows that specs “turned outright bearish on small-cap stocks for the first time since the November election [as hedge funds] went net short Russell 2000 minis by 12k contracts on March 7, after cutting long positions for a 6th straight week.”
Is that evidence that the “pros” aren’t all-in on the equity bandwagon? Maybe. But probably not.
Because after all, that very same money is the most bullish on the S&P it’s been since September. That’s what I mean by “cherry-picking.”
What accounts for the disconnect? Well, if you ask me it’s people trying to fade the Trump trade (short small caps) while staying long the overall rally.
Here’s a bit more color from another WSJ piece:
Hedge-fund exposure to stocks is approaching record levels, according to a report earlier this month by Dubravko Lakos-Bujas, U.S. equity strategist at J.P. Morgan Chase & Co.
At the same time, short positions across stocks, exchange-traded funds and equity futures recently fell to near their lowest levels in 10 years, Mr. Lakos-Bujas’s data said, which has led to more fretting by some investors.
As noted here on Saturday, this is increasingly a one-way bet. And that’s pretty goddamn dangerous when valuations look like this (via Goldman):
After the inflation in P/E multiple, the S&P 500 now trades at the 90th percentile of historical valuation relative to the past 40 years. Current consensus forward P/E of 18.1x is the highest level since 1976 outside of the Tech bubble. The median stock trades at the 99th percentile vs. history.