his week we want to briefly touch on the surging sentiment in the US stock market. This week the Euphoriameter reached the highest level in my career.
In addition, the Consumer Board’s Consumer Confidence in the Stock Market Index also reached the highest level since the data set began.
Needless to say, investors are “all-in” on the US Stock Market. This surging sentiment is playing out in huge inflows into stocks and ever more speculative ways to bet on higher prices.
This year will mark the largest inflows into the US Stock Market ever.
Nearly a quarter of those inflows have happened in the last four weeks. Just since the election, over $125 Billion has moved into the US Stock Market—The largest one month increase in flows since they began tracking this information.
While many people are just buying stocks, a lot are speculating with leveraged ETFs (exchange traded funds that borrow money to purchase more shares) and options. Both strategies are similar to gambling with someone else’s money.
Current Call-Put Ratios have only ever been exceeded during the Covid Pandemic. All of this optimism has driven US Stock Market prices to 97th percentile valuations and well beyond Wall Street estimates for 2024.
It is hard to know if the current surge in investor sentiment is irrational. We can confidently say that investors are presently assuming continued economic expansion with ever growing profitability at US companies. Only time will tell if they are correct. We are a bit concerned over the short-term with the level of insider selling.
The last time the ratio of insider sellers to buyers was this high was just before the DotCom crash. Insiders are corporate executives that are privy to non-public information including earnings. They have to disclose their buys and sells to the SEC given their informational advantage. They don’t have a perfect track record but we like to know what the insiders are doing especially when their actions are in opposition to the broader public.
