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No One Dare Question The Stock Party
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
I was chatting with a quant last week about markets and their big worry was about stress in the carry universe saying that could be a major derating catalyst, and particularly the confluence of a Fed cut and a BoJ hike next week upturning some firms over leveraged bets. Yesterday there was very large positioning in 18Dec VIX call options that aligns with those CB decisions. Have you any additional color into the carry world that could see vols coming about like in August?
“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” –
In 2009-2022, there was somewhere else to invest (Europe, China, Developing economies). Now, there are very few, if any, alternatives. I am keeping my eye on other economies, to watch for any improvements that will cause a sudden and substantial change in the flow of funds away from US stocks.