It’s barely February and US equities are up 4% in 2024 already. Coming off a 25% gain in 2023.

There’s bubble talk. There always is. With the possible exception of 2009, I can’t personally remember a year when somebody, somewhere wasn’t convinced that US stocks constitute a bubble.

Sometimes the catcalls have merit. Other times not so much. The trick is separating signal from noise in that regard, and I don’t know of anyone who can perform that trick reliably. Which is why everyone’s better served to tune it all out and own an index fund (and I do mean everyone).

I digress. It’s easy enough (which is to say plausible) to argue that equities are “due” for a correction. Individual investor sentiment jumped nearly 10 points from last week to January 31.

49.1% on AAII’s bull index is the best reading since December 21 which marked the 52-week high for the measure.

AAII asked a special question in the most recent poll: “What impact has the record high [on] the S&P 500 had on your short-term outlook for stocks?” Nearly 52% said it made them either “somewhat” or
“greatly” optimistic. The comparable share for “pessimistic” was around 32%. (16% said it had no impact on their outlook for equities.)

Amusingly, some institutional investors might’ve missed out on Meta’s singular, $200 billion value creation event. According to BofA, clients (including mutual funds, pension funds, insurance companies and banks) fled US shares in droves ahead of tech earnings, pulling more money in the week to January 26 than in any other week since 2015. That selling was especially acute in tech, BofA said.

That would’ve been the right call vis-à-vis Alphabet and Microsoft earnings, but Amazon and Meta were a different story. Separately, EPFR data showed tech-focused ETFs and mutual funds took in more than $2 billion over the latest weekly reporting period.

America’s so-called “Magnificent 7” are now equal to the “combined GDP of New York, Tokyo, LA, London, Paris, Seoul, Chicago, San Francisco, Osaka, Dallas and Shanghai,” BofA’s Michael Hartnett mused, in his latest. That seems bubbly, but as the figures below show, the bank’s pseudo-famous “Bull & Bear Indicator” isn’t flashing a contrarian “sell” signal just yet.

Plainly, a lot of folks are feeling good about the macro situation and that’s feeding into equity sentiment. And yet, Hartnett was keen to note that “unambiguously” bullish (what investors are now) is something different from “extreme” bullishness (something investors currently aren’t, or at least not according to BofA’s indicative measure).

For those curious, the increase on the indicator from the October contrarian “buy” lows is attributable to strong inflows to emerging markets, better equity breadth around the world and what Hartnett called “robust credit technicals.”

Still, “hedge funds are short the S&P,” he went on, adding that in order to get a contrarian “sell” signal, you need cash levels to fall further, hedge funds to get long US equities and/or Chinese shares and Hong Kong markets to rally at least 10%.