I’ve always been a contrarian, I’m not sure why but I prefer NOT to be in the crowded boat and right now, the boat is crowded with people who do not believe in the sustainability of the U.S. economy or its equity markets. How do I know this? From looking at equity fund flows and CFTC data that shows the boat is crowded with bears and non-believers. Here’s a chart of equity flows from ML, maybe the masses are right this time but history suggests they will be wrong with such a bearish bias. I’m happy to be buying great brands with strong competitive advantages on further dips.

The market will do what it wants to do but here’s my non-consensus thesis:

The current recovery is 10 years long but it’s been one of the weakest recoveries on record.
High debt (corporate & governments primarily) here and around the world=an anchor to growth.
Generally deteriorating demographics in many of the world’s largest economies also acts like an anchor to growth until younger demographic groups take control. The U.S. is in much better shape than Europe, Japan, and much of Asia with the Millennial and Gen-Z generations large and just beginning their peak earnings, saving, and spending cycles.
High debt & poor demographics, slow growth keeps rates low for much longer than most realize.
Most would say an aging population decreases the interest in stocks and increases the interest in bonds but if we are living longer and will need more assets that we think and our bonds yield nothing, that ultimately increases the need for our capital to grow. That makes equities a much more attractive option.
Low rates, slow but positive growth, accommodative central banks adding ample liquidity will make equities, particularly growth equities look very attractive for a very long time.
Ultimately, this cocktail creates another 2000-like bubble in valuations and euphoric equity sentiment.
Based on the recent flows out of equities and generally poor equity sentiment among professional allocators, I’d say we are nowhere near a major top for equities.
BUY THE DIPS, BUY QUALITY BRANDS, BUY INNOVATORS & DISRUPTERS

DISCLOSURE:

This information was produced by and the opinions expressed are those of the author as of the date of writing and are subject to change. Any research is based on the author’s proprietary research and analysis of global markets and investing. The information and/or analysis presented have been compiled or arrived at from sources believed to be reliable, however the author does not make any representation as their accuracy or completeness and does not accept liability for any loss arising from the use hereof. Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein. There are no material changes to the conditions, objectives or investment strategies of the model portfolios for the period portrayed. Any sectors or allocations referenced may or may not be represented in portfolios managed by the author, and do not represent all of the securities purchased, sold or recommended for client accounts.