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”?
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of 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.
-
The Upscale Upgrades Coming to a Country Club Near YouYoung country club members expect more from their fees than access to a golf course. From teen rec rooms to red-light therapy, this is how clubs are upgrading.
-
I claimed Social Security six months ago at 62, but my checks are too small. What are my options?We asked financial experts for advice.
-
Five Retirement Planning Traps You Can't Afford to Fall Into, From a Wealth AdviserTo help ensure you reach your savings goals and enjoy financial security in your golden years, be aware of these common pitfalls. The key is to be proactive, informed and flexible.
-
Your 401(k) Can Now Include Alternative Assets, But Should It? A Financial Adviser Weighs InMany employer-sponsored plans offer limited investment options, which can stunt growth. But participants considering alternatives might need some sound advice to get the most from their accounts.
-
Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very LikelyConventional wisdom dictates that you save in a 401(k) now and pay taxes later, but turning that rule on its head could leave you far better off. A financial planner explains why.
-
More Retirees Are Renting: Should You? A Financial Adviser Weighs InIn some ways, renting is cheaper, more flexible and easier, but unless you understand the implications for your taxes and health costs, it might not be for you.
-
I'm a Real Estate Investing Pro: This 1031 Exchange Strategy Can Triple Your Cash FlowSavvy investors can use 1031 exchanges to unlock value by moving capital across markets in a play called geographic arbitrage. These tax implications can make or break the strategy.
-
I'm an Insurance Pro: Everyone Needs to Prepare for Earthquakes, Even if You Don't Live Near a Fault LineHere are my tips for what to do before, during and after an earthquake. The more prepared you are, the more you'll be able to keep your wits about you if it happens.
-
Where There's a Will, There's a Way Your Assets Will Be Distributed as You WishYour will is the backbone of a strong, adaptable estate plan that ensures what you leave behind goes to your selected beneficiaries. Without a will, state laws determine who gets your assets.
-
I'm a Financial Adviser: This Is What You're Really Losing if You Cut Back on Your 401(k) ContributionsMissing out on the benefits of the employer match and compounding growth could force you to work longer and lower your standard of living in retirement. Here are some alternative options.
