Here’s an insightful question from David Rosenberg of Gluskin Sheff on the matter of the current rally in global equities.
Who is actually doing the buying?
As Rosenberg notes:
- It’s not private clients – stock funds registered net outflows of $1.33bn last week.
- It’s not corporate insiders – heck they’re selling like crazy.
- It’s not buybacks – S&P reported they were down to the lowest level since 1998.
Nope indeedy. This leaves him to conclude it must be:Very likely it is still a combination of program trading, short coverings and portfolio managers desperately trying to make up for last year’s epic losses.And, just to leave you with a scary fact for the weekend, he adds:
While it is now considered to be in very bad taste to say anything negative about an equity market that is seemingly on a one-way ticket north, by the time the S&P 500 was up 60% in the last cycle, claims had already fallen to 300k. And, in the cycle prior to that, claims had drifted down to 350k by the time the market had rallied 60%. The market is so overextended that it is now 20% above its 200-day moving average, which is a technical condition that has not occurred in 27 years.
Related links:
The anaemic equity rally – FT Alphaville
The (QE)uropean equities rally and yields - FT Alphaville
SEC proposes ‘flash order’ ban – FT Alphaville