Equities Euphoria Sends Signal

Posted | 29/01/2018 / Views | 1330
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Whilst Aussies enjoyed their BBQ lamb on Friday sharemarkets continued their incredible run in 2018, the S&P500 now up 7.4% in just 1 month to new all time highs.

But Bank of America Merrill Lynch are now very worried.  This is looking very much like the euphoria stage in a market and they say they are seeing the biggest sell signal in 5 years.  The chart below shows the biggest inflows into global equity funds in a week – ever.

Equities Euphoria Sends Signal

In addition to the above $12.2b into active equity funds (not the passive ones we reported on back here), there was a record $32b into all equity funds, and (continuing our ‘smart money hedge thesis’) a near year long high of inflows into gold, at $1.5b.

These flows are coming out of debt and also cash reserves.  The market is going ‘all in’.  Firstly from corporate debt:

Equities Euphoria Sends Signal

And a record amount of cash, leaving the ‘big money’ at their lowest cash position ever…(GWIM is BofAML’s high net worth fund).

Equities Euphoria Sends Signal

Since BofAML have been doing their Bull & Bear Indicator in 2002 they have issued 11 sell signals and nailed it 11 times.  Mind you they aren’t calling for a huge crash, just a correction and with timing of Feb / March.  The elephant in the room however is how this strung out ‘all in’ everything bubble will handle such a correction.

Equities Euphoria Sends Signal