This was the month when the crowd shifted decisively from fighting the bull to embracing it. The sheer persistence of the equity rally, with the S & P 500 up 16 of 18 weeks and refusing to succumb to supposed late-February seasonal weakness, has converted the cautious. The extreme torque in stocks levered to secular AI and anti-obesity trends has become tougher to resist. And, of course, the absence of any quit in the U.S. economic expansion, the unflinching appetite for corporate credit and faster-than-expected earnings growth have made it harder to sit out the rally. It’s no fun idly watching others have all the fun. Call it the “belief” phase of the bull market, when most participants have signed on to the prevailing positive price action and fundamental story line and are more willing to allow equity exposures to rise. To Scott Rubner, tactical trading maven at Goldman Sachs, the upshot in the near-term goes beyond mere belief. “U.S. equities have entered a period of euphoria,” he told clients last week, “which has proved impossible to call the top and analysts are upgrading their year-end price targets by the day given the Goldilocks and soft-landing narrative from the market.” Identifying euphoria, of course, is both art and science, and euphoric states tend to build a while before they give way to some harsh reality check. But it’s fair to point out the proliferation of excitable good feeling in various market pockets. We can see it in the extreme outperformance of momentum stocks, the feeding frenzy along the entire food chain of AI-tinged semiconductors, the mad grab for second- and third-derivative plays on the AI theme. (Nvidia’s dominance is obvious to all and now valued above $2 trillion by the market, thus the rush for Super Micro Computer, Dell Technologies, ARM Holdings and names too gamy and insubstantial to mention.) Call-options volumes are again surging, bitcoin’s run to a new high has awakened even the jokey “meme coins” and busted, heavily…
2024-03-02 09:07:00
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