“It is a speculative market on steroids. Right here’s the proof:

Valuation: The CAPE smoothed P/E a number of has expanded for six straight months. It bottomed at 24.eight in March on the worth index trough, closed December at 33.7, then to 34.5 in January, and now to 34.eight in February. By means of comparability, the a number of was 32.three in March 2001, because the tech wreck bear market actually received going; and 32.6 in September 1929. Traders all the time assume they will get out earlier than the height is in. Historical past rhymes.

Leverage: Margin debt has soared 42% from a 12 months in the past (+115% at an annual charge over the previous three months alone). That is precisely what the pattern was in August 2007 and September 2000. Proper close to the market peaks.

Positioning: The put-call quantity ratio has been beneath 0.60 with close to consistency for the reason that center of November. It’s a stretch we haven’t seen in over eight years. The BofA survey reveals that international portfolio managers are operating with the bottom money ranges in eight years, and have the very best exposures to equities and commodities in a decade.

Technicals: The truth that the S&P 500 is now 13% above its 200-day transferring common is an excessive hole value noting and monitoring — it was 11% again in February 2000, simply forward of the tech mania bust and seven% in October 2018, forward of the near-20% drawdown heading into the top of that 12 months.”


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