This continues to be a remarkable Bull run. Fresh, all-time highs were reached for the S&P and the DOW this week. Of significance, leadership has changed. Financials and Industrials took off while Tech, the top leader for years, has been taking a breather. The Tech-heavy NASDAQ Composite reached its all-time highs in August and has backed off that level. It’s a mere 1% below. This is all really positive stuff. It’s also caught so many people off guard and wondering why it’s happening with so much uncertainty around politics, geopolitics and global trade. International markets rallied this week as well, something completely different from weeks passed. The Market likes what it sees.
When the Stock Market or an individual stock hits an all-time high, it means that people were willing to pay a price that no one before them has ever paid. It means that no one has a loss in the stock or is waiting to get back to even so they can sell. It also means that all those people who had been waiting for that pullback to buy are now kicking themselves in aggravation. Our analysis shows there’s a whole lot of those people and they’re forced to chase. Many new all-time highs are merely stepping stones toward the next set of new all-time highs. That is what a Bull Market looks like. It is uncharted waters. It’s the best of the best. Apple and Amazon reached $1 Trillion. This has never happened before.
Ironically, American investors have been sellers all year. Since the correction, 5 of the 7 completed months have seen money flowing out of stocks and into bonds. This has occurred while stocks have rallied and bonds have declined in value. Only 55% of Americans own stocks today. It’s measured with 401k’s, stocks, mutual funds, and exchange-traded funds. It was 65% in 2007 and 62% in 2000. Not everyone participates in company retirement plans when they’re offered. Others have selectively opted out of the Stock Market. When you consider all of the unconventional and extracurricular activities going on around the world pertaining to politics and geopolitics, it’s easy to see why. The rally this week caught so many skeptical investors leaning the wrong way. There’s a lot of them. The chase is on.
What makes this Bull Market unique is its character. This Bull has charged higher in the face of so much adversity and conflict. That’s really all it has known. Investor sentiment is really low right now. There is very little euphoria anywhere. The most recent survey shows only 32% of investors are bullish. This is a major decline from 60% when polled back in January, right before the correction began. You can see why this contrarian indicator can be helpful. Interestingly enough, bearish sentiment this week came in at the exact same level at 32%. Think about this; only 1 in 3 investors are optimistic with the DOW and S&P at all-time highs. Taking it a step further, 1 in 3 is downright negative. This is the complete opposite of how things were during the Dotcom days. In case you’re wondering, the last time both sentiment gauges were at the exact same level was in June 2016. That was right before the Stock Market exploded higher from the previous correction.
We see more room for this Bull to run and the chase for participation is on. We know this Bull Market won’t last forever and have clear action plans in place in preparation for the end.
Have a nice weekend. We’ll be back, dark and early on Monday.
Thinking globally while giving back locally.
We spent an evening on Mount Diablo as supporters of Save Mt. Diablo’s annual Moonlight on the Mountain fundraising gala for the 5th consecutive year. It was a night filled with good food, company and thought-provoking conversation about nature and preservation.
We have been a long-time supporter of Save Mount Diablo, an organization focusing on protecting Mount Diablo’s surrounding areas from the risk of being lost to development forever. Their mission is to preserve Mount Diablo’s peaks, surrounding foothills and watersheds through land acquisition and preservation strategies designed to protect the mountain’s natural beauty, biological diversity and historic and agricultural heritage. We have also partnered with Save Mt. Diablo and the Moraga school district to fund a daylong outing and service project with middle school children.
Bedell Frazier is a proud supporter of Save Mt. Diablo!