I am flying out to give a presentation to the Value Investor Forum in lovely Scottsdale, AZ. It’s always fascinated that people move to a desert and then try to figure out how to irrigate it to grow grass. It all seems a little backward, but they do have some lovely golf courses.
Speaking of seeming backward, the economic data has continued to disappoint on virtually all fronts, earnings are weak and markets are grossly extended. Yet, investors are more bullish than ever as noted yesterday:
“While investors may be looking for returns, they are ‘extraordinarily optimistic about their investment prospects in both the short and long term,’ says Natixis. Respondents say they need 10.1 percent return on their investments, and 81 percent of them feel their expectations are realistic.
Fifty-four percent expect their returns this year to be better than 2014.
Stocks will be the best-performing asset class this year, according to 45 percent of the respondents, followed by 17 percent who say cash will be the top performer.”
While it has been repeatedly stated that individuals have “missed out” on surging asset prices, it has only been those with little or no money actually to invest with. However, for those that are invested, they are as optimistic as at every previous bull market peak in history. As shown in the chart below from the American Association of Individual Investors (AAII), individuals are at the highest levels of stock allocations, and lowest cash, since the financial crisis.
But then again, maybe it is just me.
But, for now, the markets clearly remain in their bullish trend as discussed in last weekend’s newsletter. This suggests that portfolios remain tilted more heavily to equity based exposure at the current time, but attention should be paid to the rising levels of risk that exists.
With that said, I wanted to share with you my list of articles I have downloaded to read while winging my way to Arizona.Â
