You’d be hard pressed right now to find a strategist willing to swim against the tide or fight the tape by making the case for an imminent correction in buoyant US stocks, which came into CPI week riding an impressive win streak.

Inflows to US-focused equity ETFs and mutual funds have been nothing short of staggering — $185 billion since mid-October.

You’ve seen the charts. Here’s another version:

That’s the same four-week rolling chart I’ve used repeatedly in recent days, only zoomed out to capture a two-decade lookback for added context. Although the pace slowed last week, we’ve just witnessed the largest 30-day rolling net buying spree in US equity funds on record, bar none.

That doesn’t mean positioning’s maxed out. In fact, systematic strats would have at least a bit more re-leveraging to do if vol stays contained and some in the discretionary crowd still don’t have enough exposure to a rally that ran away from them post-election. And then there’s the seasonal, which is favorable.

Even Mike Wilson’s constructive these days, with some caveats. “Post the election, focus has been on the potential for a rebound in animal spirits like we saw following the 2016 election,” he wrote Monday, adding that in Morgan Stanley’s view, “consumers and companies are feeling optimistic heading into 2025, but the uncertainty around tariffs and the still elevated level of prices, in particular, are likely holding back the type of exuberance we saw post the ’16 election.

The figure above, from Wilson’s latest, shows the summary statistics for four and a half decades of Decembers. The hit rate in the back half of the month’s high.

A bit of trivia: The worst December for US equities since the Great Depression (i.e., the -9.2% “min” in Wilson’s table) was 2018, when Donald Trump’s border wall fight conspired with Jerome Powell’s stubbornly hawkish policy bent and, ultimately, rumors that Trump was inquiring as to a mechanism by which he could demote or fire Powell, to ruin Christmas on Wall Street.

Don’t worry, Trump learned his lesson. He’d never ponder, let alone publicly, dismissing Powell before the end of his term, nor would Trump again threaten to paralyze the US government over an outlandishly quixotic policy idea. (I’m just joking. He does both of those things all the time, and will continue to do so once he’s back in the White House next month.)

It’s possible, I reckon, that in our determination to avoid being the lonely bear at a party full of bulls, we’re overlooking what, in hindsight (and notwithstanding the fact that markets tend to ignore geopolitical risks until there’s a “reason” not to), will look like a laundry list of obvious stumbling blocks, not least of which is a great power struggle.

On a smaller, less important scale (i.e., less important than a prospective third world war), it’s important to remember that rates across the developed aren’t going back to pre-pandemic levels, even as equities trade on multiples that suggest money’s still free, or will be again soon.

To be sure, rates are going lower. The figures below, from BofA, show the bank’s projections for policy easing around the globe. If the bank’s right, 2025 will see the fourth-most global rate cuts in 25 years behind only 2020 (the pandemic), 2009 (the immediate aftermath of the GFC) and 2024 (this year).

That’s a lot of rate cuts in two years, and as the figure on the right shows, the implication is that the global, GDP-weighted policy rate will be 200bps lower from the peak in November 2023 by the end of next year.

But note that 3.9% — BofA’s projection for the weighted global policy rate 12 months from now — would still be miles above the average level observed during the post-GFC years. And yet, as JonesTrading’s Mike O’Rourke wrote Monday, “the financial markets are in the midst of a speculative frenzy and the S&P 500 is at one of its most expensive valuations in its history.”

O’Rourke’s argument is that cutting rates further will only exacerbate the situation, and it’s hard to argue with that, but then again, if profit growth falls short of expectations, forward multiples for the richest names in the market (and for key cap-weighted benchmarks) are going to look even more untenable than they already do. If the Fed doesn’t cut in such a scenario, there’s no justification for the valuations at all, and thereby nothing to prevent a ghastly de-rating.

For his part, Wilson suggested that 4.00%-4.50% on US 10s is “the sweet spot for equity multiples,” the argument being that anything below 4% would likely be indicative of a slowdown and anything above 4.50% of another term premium scare. I just wonder if things (all things) have really changed so much that equities can now safely trade at record-high multiples with yields (and real yields) triple and quadruple where they were from 2009 to 2022.

There are of course models (famous ones) you can consult to help answer that question, but… well, suffice to say there was a time not so long ago when the mere mention of 4% 10s (and 2% on 10-year reals) would’ve been enough to spark a selloff. Now, we’re effectively saying that as long as we don’t see 2.5% on 10-year US real yields again, stocks can continue to “safely” trade at what, depending on the metric, are the richest valuations in history.