There is no question that the stock market is richly valued and the economic expansion since the 2008 mortgage debt panic has endured far longer than normal cycles. Recent pessimism has arisen with major banks and analysts warning that the sky may start falling soon. Increased negative forecasts can be a positive contrary opinion signal, so let’s look at some of the concerns the major bulge banks are propagating.
Recently, $30 billion in funds flowed out of US equities and the current mid-2017 outflow is at record levels, which is being portrayed as a scary signal of impending doom. Oddly, past extreme spikes in fund outflows were good times to begin buying stocks. In particular, the two most impressive rush for the exits occurred in mid-2004 and early 2016. In hindsight, these were a couple excellent points to buy stocks hand over fist. Apparently, many institutions equate this extreme proxy of equity fund outflow and today’s high priced stock market as a valid correlation when their own evidence would indicate otherwise.
