Monday, 18 November 2019

S&P 500 sits at all-time high as investors show “extreme greed”

The S&P 500 rose 0.9 percent last week for its sixth consecutive weekly gain.

Year-to-date, the S&P 500 is up 24.5 percent and sits at an all-time high.

Julia Horowitz at CNN Business sees a case for more stock market records.

“Sentiment is improving — allowing markets to continue pushing higher and higher,” she wrote.

Horowitz said that one month ago, CNN Business' Fear and Greed Index had a “neutral” reading. Now it is showing “extreme greed”.

At the same time, economists are becoming more optimistic about the economy.

“We see no economic reason for a recession in the advanced world in the next two years,” Berenberg economists said in a note to clients on Friday.

Similarly, Bob Pisani at CNBC noted that as the S&P 500 set record highs, euphoria has been growing.

Some technicians “have been positively giddy recently” while strategists and retail investors “are gaga with enthusiasm”.

However, he also sounded a note of caution.

“All this euphoria would be great if we were coming off of a big sell-off — but we’re not,” he wrote. “The major indexes are at new highs as is the advance/decline line. Put it all together, and the market is clearly overbought.”

Indeed, Oxford Economics thinks that US stocks are overvalued by around 35 percent.

“The twin pressures of weak pricing power and low productivity imply a bleak outlook for margins – warning signs of a market that seems to have got ahead of itself,” an Oxford Economics team wrote.

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