February was another very strong month for global equities, with the US market enjoying its best month since October 2011. Global equities are now up by 5.1 per cent this year, exceeding even the heady pace of the 2012-14 advance, though this time the Eurozone (+ 14.7 per cent) has outpaced the US (+ 2.2 per cent).
Once again, the pessimists have been confounded. The US market has now tripled since 2009, and has risen in a virtually straight line for over three years. The analyst community on Wall Street remains almost uniformly bullish about US stock returns in 2015. Although cynics will say “they always are bullish, that is what they are paid for”, many other indicators point to extremely positive market sentiment, with active equity investors generally positioned for further upside. And the VIX measure of equity volatility, a gauge of investor concern, is languishing near its long term lows at about 13.
Has the US market finally reached the point of over-exuberance? As Warren Buffet reminds us this weekend, market timing is always difficult, and it is particularly difficult to pick the top of a rampant bull market. But there are certainly increasing grounds to worry about the sustainability of the market’s advance in the rest of this year. Read more