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Euphoria (‘Cough – Don’t Do It’)

It's kind of like going to a wedding reception and telling one of the newlyweds that the person they just married is a pathological liar or that getting married was a terrible idea in general.

When you really think about it, there’s something nonsensical about telling investors that the assets they just bought are in a bubble.

It’s kind of like going to a wedding reception and telling one of the newlyweds that the person they just married is a pathological liar or that getting married was a terrible idea in general. You probably wouldn’t do that – unless you’re Beanie

 

Once people are committed, they’re less likely to listen to reason. They’re in confirmation bias mode not “tell me why this might have been a bad idea” mode. In short, they need to be told why what they’ve done isn’t stupid – not why it is.

 

That probably helps to explain the angry e-mail we get from time to time where “from time to time” means “every, single day.”

But like Beanie, we’re going to tell you when you’re likely making a mistake -“don’t do it – cough – cough.

So to that end, we present the latest read on BofAML’s “Global Equity Risk-Love Indicator” (tracks positioning, put-call ratios, investor surveys, price technicals and volatility, spreads and correlations). If you’re long, you’ll be distressed to know that it’s (still) sitting in “Euphoria” territory:

RiskLove

For those interested (or, perhaps more appropriately, for those who are looking for reasons to think they haven’t made a terrible mistake), here’s the breakdown of the 35 indicators, some of which aren’t yet flashing red.

Via BofAML

Global equity risk-love sentiment, which has two-thirds of indicators from developed markets (DMs) and one-thirds from emerging markets (EMs), continues to hover around the euphoric zone. Volatility, spreads and correlation factors are stretched to the euphoric end of their range historically, whereas positioning, surveys and put-call ratios are more neutral-ish.

Heatmap

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