Over the last few weeks, the message from the newsletter has been repetitive:
“The markets are overbought, overextended, overly complacent. A correction is coming so reduce and rebalance portfolio risks.”
Despite those issues, the markets continued to push higher leaving readers with the assumption the “warnings” were wrong.
As noted last week, there have only been a few points over the previous 25-years where investors were so extremely lopsided in their positioning. We have shown many charts of investors being “all in” to equities over the last three weeks, but here is the latest Fund Manager’s Survey, which shows cash balances at 6-year lows.
The importance of these measures is not meant to be a “timing” signal to buy or sell positions. These measures are more valuable when thought about as an “accelerator” in a car. When markets are rising, investors press down on the accelerator, taking on more equity risk. As long as the road is straight, and visibility is good, it seems there are no consequences for driving at high speeds. However, if the road suddenly turns, or a hazard presents itself, bad outcomes happen very quickly….CLICK for complete article