The current market environment is a tough one to handicap.
On the one hand, there aren’t any flashing warning signs in terms of euphoria from investors. On the other hand, the “most hated bull market of all-time” continues to charge higher, causing valuations and investor allocations to stocks to go far above their long-term averages. There seems to be ample ammo for both sides of the bullish and bearish market contingents.
The other trend that has some people optimistic and others concerned about what it means for the markets is the enormous growth in index funds and ETFs. Some people think the low-cost investing revolution is a long-time coming while the other side of the debate is worried about the potential side effects and unintended consequences caused by the huge amount of money piling into more passive investment products.
As with most things, there is no black or white on these issues. They require context and perspective before passing judgment. Yesterday I was on What’d You Miss? with Julia, Scarlet and Joe to discuss these issues more in depth (my segment starts at the 3:30 mark):
And here are the pieces I recently wrote on these topics for Bloomberg for more thoughts:
How Equities Took Over Asset Allocations
Saying There’s a Bubble in ETFs Makes Little Sense
