Guys, we remain firmly inside this wave five and i do hope all are enjoying the ride here.
I read this week Merrill Lynch Global Research are calling this wave five likely to become a “speculative mania” across all risk assets.
“The longer it takes central banks to tighten, the greater the risk of a 1999-style speculative mania, says Michael Hartnett, Chief Investment Strategist at BofA Merrill Lynch Global Research. Hartnett notes that if the S&P reaches 2630, the ratio of global market capitalisation to global GDP will exceed the all-time highs set in 1999 and 2007. He thinks that the longer it takes central banks to tighten, the greater the risk of tech and growth stocks entering a speculative frenzy. As technical evidence for this, Hartnett warns that the BofAML Bull & Bear indicator* (B&B) is creeping up toward a “sell signal” of 8 from its current level of 7.3 (see figure below), which is its highest level since July 2014. He advises staying long risk assets until sentiment reaches the “euphoric” territory of 8.0, which may come during the summer”.
I have to say i’m increasingly of the view that this is where we are heading. Of course geo political events can interrupt this flow of endless liquidity but otherwise we are firmly on a road to infinity and beyond for asset prices and I expect this to likely continue into next spring before the mean reversal.
“When I see a bubble starting to form I buy”. Soros.
We certainly now have a risk bubble forming though we are still early in the euphoria stag, in my opinion.
Anyway new record highs once again for my book (measured in euros) even as the euro strengthens so all is good. I’m traveling once again so Ill post this up with out delay. Ill update as a v2 in the coming days. The price levels are clear. The cyclical catch up sectors are clear. FX is clean once again. Ill leave the comments to the guys. For now this mkt is akin to “shooting fish in a barrel” and i’m reminded of the 2000 mkt and to a lesser extent 2007 highs. When a market has momentum and volume the probabilities for successful entries and exists shoot upward. Enjoy it whilst it lasts.
Here the guys:
All the best
Rich