Wall Street’s Bulls Starting to Worry About the Market Hitting Bubble Territory


A Report of their trading activity says "Smart Money" is betting market is is only percentage points from its peak.

Lori Calvasina, is the head of US strategy at RBC Capital Markets, who says the rally has firmly entered "euphoric" territory. Rather, she sees evidence beneath the market's surface showing that this rally resembles previous market tops, including the lead-up to the dreadful 2008 crisis.

One gauge she's watching is derived from futures market positioning data. That data is not clocking amateur speculators: the data represents the trading activity of big investors including pension funds, endowments, insurance companies, mutual funds, and portfolio managers who predominantly serve institutional clients. The so-called "smart money".

Even though the market had its second best year post crisis she saw two of the largest rallies and likened them to what she saw prior to 2008. Calvasina said in a note to clients, "While it's tempting to say the market is breaking out of the rut it's been trapped in for the past few years, when we dig down into the details we come away even more convinced that a positioning peak is in the process of being made”. She has made a bold prediction, Her year-end forecast for the S&P 500 is 3,460, which is above both the average and median of 20 of her counterparts at other firms computed by Bloomberg.

Ultimately, she expects stocks to continue rallying by about 6% this year, based on the starting position of the S&P 500.

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Economics, Finance and Investing