“The only reason to be bearish is… there is no reason to be bearish.”
That was the headline of the Bank of America Merrill Lynch Global Fund Managers Survey in February.
The monthly survey asks roughly 200 investment pros what they see in the market. And according to them, there’s no good reason not to bet on stocks.
That kind of blanket euphoria is what propels a stock market Melt Up. Folks see a one-way ride to profits. And they jump in with two feet.
Today, I’ll share more about the euphoria I see in the markets, and what it means for you as the Melt Up continues…
Professional investors haven’t changed their tune since February. The most recent Fund Managers Survey is out. And these folks are just as bullish today as they were back then.
As one example, cash holdings for these fund managers are near the lowest we’ve seen in the past decade.
For professional investors, holding cash is like a call option for lower prices. When they think the market is headed higher, holding cash only hurts them. And today, cash levels are incredibly low.
Cash levels were only lower earlier this year, at the depths of the COVID-19 bust, and in early 2013. So these folks are betting on more gains in stocks.
Similarly, a full 62% of these folks are overweight stocks right now. That’s the second-highest reading since the data begins in 2002.
The takeaway from all of this is simple… Professional investors have entered a state of euphoria right now. And amateur investors are in the same boat.
The American Association of Individual Investors (“AAII”) surveys its members each week. These folks are individuals, not fund managers. But they’re equally bullish today.
A recent AAII survey showed that 57% of respondents were bullish on stocks. That’s one of the highest readings we’ve seen over the past decade. Take a look…
Individual investors have only been more bullish twice in the last decade… in late 2014 and early 2018. And as the surge in stocks continues, we’re likely headed to even more extreme readings.
This all paints a clear picture for the markets. Whether it’s professional investors or individuals, everyone is bullish.
It’s hard not to be in today’s market. Just about everything is going up. Making money seems easy. So why not jump in and take advantage of it?
That euphoric and reckless mentality is what will propel the Melt Up to its final peak. But it’s also a warning sign we want to be aware of.
These are not normal times. But the craziness gives us an opportunity to profit. You must take advantage of it while you can.
Good investing,
— Steve
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Source: Daily Wealth