With Stocks The Most Overbought In History, Goldman Warns: ‘Risks To EPS Tax Tailwind Are Two Sided’
If, on the other hand, you're just buying on the assumption that there will be a greater fool willing to buy even higher, well then carry on because that seems to be a "fool"proof strategy - pun fully intended.
He's not right about much and he's not right very often, but Donald Trump's contention that the inexorable rally in stocks would become, well, even more inexorable if only Republicans were allowed to shove a corporate tax cut up America's already over-fucked ass seems to have been spot-on.
Of course it's not entirely clear how much of the most recent leg up in stocks is attributable to a rational assessment of the benefits that are set to accrue to investors from the passage of the tax bill and how much of it is attributable to everyone simply trying to frontrun everyone else on the assumption that even if I don't think the tax bill is going to be a bonanza for corporate bottom lines, the next guy sure does, so I'll buy now assuming he'll buy later.
Whatever the case, the rally has hit something that approximates escape velocity in the new year and according to BofAML's Michael Hartnett (Mr. "Icarus"), $58 billion has flowed into stock funds in four weeks, the most on record.
That's translated directly into an S&P that's the most overbought in history:
As Goldman notes, this has been accompanied by a sharp upward revision to earnings estimates. To wit, from a
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