Are we reaching a point of maximum optomism?

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Spidey
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Are we reaching a point of maximum optomism?

Post by Spidey » 24 Dec 2016 08:57

Just food for thought. Are we reaching a point of maximum optimism? I notice almost every BNN guest/expert is bullish, many even recommending avoiding fixed income altogether. The US markets are at record highs and TSX is close to the record. To date, most of our predictions in the predictions contest (including my own) are bullish or at worse relatively flat. Of course, as with maximum pessimism no one knows the exact point of maximum optimism and I suspect we have a little more of a ride left. But as Warren says, "Be fearful when others are greedy".
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nisser
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Re: Are we reaching a point of maximum optomism?

Post by nisser » 24 Dec 2016 12:58

I would say that about oil. I see no reason why everyone continues to be so bullish about oil. The stocks are approaching their pre-crash highs (and some have even surpassed it, i.e. suncor) while very few companies are making money at these levels. Shale oil companies can easily turn up the tap for any promised-but-probably-never-to-be-delivered OPEC cuts.

MackResearch
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Re: Are we reaching a point of maximum optomism?

Post by MackResearch » 27 Dec 2016 00:20

I was thinking about this since I have a number of sentiment indicators which aim to quantitatively measure levels of optimism (or fear). So far they show elevated optimism, but nothing extreme.

Due to the unique situation with President-Elect Trump, it's worth looking at times when elevated sentiment has not sparked a reaction in stock prices. Going back over the past several years, 1Q2013 sticks out. Markets were very much overbought by traditional measures but the recent implementation of QE3 was enough of a driver for stocks to continue higher for another 18 months without as much as a 5%-6% correction. Pretty incredible.

Based on what Trump has stated (lower taxes, rolling back of regulation and fiscal expansion), I think the impact could rival QE3 and a similar market reaction to the current elevated sentiment might make sense.

Worth thinking about...

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AltaRed
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Re: Are we reaching a point of maximum optomism?

Post by AltaRed » 27 Dec 2016 11:20

MackResearch wrote:Based on what Trump has stated (lower taxes, rolling back of regulation and fiscal expansion), I think the impact could rival QE3 and a similar market reaction to the current elevated sentiment might make sense.

Worth thinking about...
Indeed, but I'd suggest it is a 'sucker punch'. Congress is unlikely to permit DT to do anything remotely as excessive as DT has asserted (even DT is beginning to show that he doesn't walk his own talk), and Yellen (and her eventual successor) will use the Fed Rate tool to dampen political stupidity. I'd suggest markets will be disappointed overall. Maybe not enough for a bear market, but enough for a sidewinder frustrating experience.
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Re: Are we reaching a point of maximum optomism?

Post by Garthd » 27 Dec 2016 21:50

Agreed I hear a lot of optimism, so a correction is due for sure. But, what a don't see is any panic to get greedy. Read the under the mattress thread and lots are talking about getting another decimal point on GIC's.

There are still lots of people left behind in this Bull and until the last diehard capitulates we have room to run.

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