The current bull market, which started in early 2009, has been called “the most hated bull market in history.” It seems investors have been waiting in vain for that other shoe to drop only to see the market march higher with nary a correction.
Stocks climb a proverbial wall of worry, and negative sentiment among rank-and-file investors is actually a contrarian bullish sign. It is when sentiment gets one-sidedly bullish and investors throw caution to the wind that you know a major top is near.
But with the S&P 500 now sitting near all-time highs… and tripling in value from its 2009 crisis lows… is it really fair to call this rally “hated”?
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.
Let’s take a look at investor trading on margin. When investors are feeling bullish, they are a lot more likely to trade aggressively… and to borrow money to do it.
As you can see in the chart, investor margin debt as a percentage of market cap does indeed tend to surge leading into a major market top and tends to fall dramatically during a market decline. We saw investor margin debt jump from less than 1% of market cap to nearly 2% during the great 1990s tech bubble. And it had another major spike during the bull market of the mid 2000s.
Today, we certainly don’t see a lot of investor enthusiasm for margin trading, and margin debt is actually trending lower. We’re still at levels that are high by historical standards, but much of this can be explained by two factors:
- Ease of margin trading with discount online brokers
- Falling interest rates over the past 30 years…and particularly over the past 6 years.
Remember, the Fed has kept short-term lending rates at close to zero for six years now, so it’s natural that investors will borrow more aggressively on margin. “Free money” makes carry trades that wouldn’t be profitable under “normal” conditions worth doing. Seen in this context, today’s margin debt levels are far less impressive and certainly far less indicative of investor enthusiasm.
So, at least by this metric, our bull market today really is more unloved than hated, at least by the standards of recent major tops.
-
-
Target, Starbucks Team Up for Curbside Pickup
Drive to Target, pick up your stuff — and get coffee without leaving the car. Prefer to stay home altogether? Buy into an offer of free home delivery from Target for a year.
-
Heat Pumps vs Solar Panels: Which Give More Energy Savings?
Whether you choose heat pump or solar panels, it just got easier to save on energy bills.
-
2 Ways Retirees Can Defuse a Tax Bomb (It’s Not Too Late!)
If you’re retired and find yourself sitting on a “tax bomb,” you may think there’s nothing you can do. But two strategies could seriously reduce your taxes in retirement.
-
5 Trends in High-Net-Worth Philanthropy
Wealthy families and organizations are giving more to charity but also targeting funding to fewer grants in their efforts to create bigger impacts.
-
6 Ways a DAF Can Make Your Year-End Giving Better Than Ever
Giving appreciated assets instead of cash could be the most tax-smart move you can make with a donor-advised fund, but wait, there's more…
-
Life Insurance Strategies to Consider When You Own a Family Business
Not only can life insurance replace lost income, but it can help with estate taxes and provide a sense of fairness for family members who don’t participate in the business.
-
Short-Term Investments to Protect Against Inflation and Market Volatility
Rates on Series I savings bonds, T-bills and fixed annuities are all above historical averages and could serve investors well during turbulent times like these.
-
What’s the Difference Between Average and Actual Rate of Return?
An average rate of return can mask losses over time, so what investors really want to keep an eye on is the actual rate of return.
-
Can You Build a Retirement Income Plan With Both Risk and Reliability?
Two strategies for making retirement savings last — probability-based income planning and guaranteed income planning — can help ensure you have what you need in your golden years, but which is right for you?
-
5 Financial Wellness Tips to Help Weather the Winter
You can regain some control over today’s money pressures by exploring your employer's financial support options and benefits, making plans to save and taking other simple actions.
