Financial advisers are now asked to be cognizant of where the current market is standing, and where it has been previously. That helps in influencing the clients, as well. Currently, U.S stocks are flying quite high, therefore; it’s time for the advisers to put some caution to their respective clients. It has already been two decades since the Federal Reserve chairman used the term “irrational exuberance.” This term was used for describing the general investors’ mood during that December 1996 speed at American Enterprise Institute.
It was before the advent of modernized social media culture. And this step, at that point of time, was considered to be bold declaration from head of Fed, who was quite concerned about the present inflated market valuations during the time of dot-com bubble. And this comment drew criticism and praise, at the same time.
The later market:
After three long years in early 2000, this market provided its last word. That’s when the nation got to witness the 2 and half years peak to trough pullback, which amounted to a decline of 45% for the current S&P 500 Index. It is not quite suggested that the stock market is on precipice of similar fall, but it’s the duty of the financial advisers to be cognizant of where the present market is relative to the one, it has been previously. That helps in proving some points in influencing the said clients, as well.
Emerging rate of market stock:
Earlier of this month at the Sohn Investment Conference, the CEO of the DoubleLine Capital recommended a shorting S&P 500, which is going long with the emerging market stocks. On the other hand, the CEO even clarified that this strategy is not just a relative value plan, but more than that. It is more than just a full-on bet against the much awaited S&P.
Stack against the latest investor measurement clearly highlights the bullishness, which was not seen since 1993. It seems that the advisers should start preparing to earn their pay by just ensuring that clients do not lose their perspective.
Strong form of investor sentiment:
Most of the professional market researchers look for strong investor sentiment. These are measured by the rate of low volatility as the primary sell signal. At present, the S&P is up above 250% from the lows in the well-known financial crises of 2008. However, there are some strong pull backs along the said way, as well.
At present, investors are eyeing for some presidential election and the upset victory of the J Trump. These are associated with strong corporate earnings, along with more business-friendly tone and falling unemployment with a business centric note to it.
More on the cards:
For some extra bullish investors, the exchange and security commission recently approved the exchange traded fund. It quadruples the exposure to the said S&P 500 and this might be described as the aggressive exuberance. It is important for the advisers to remember that clients are not always rational, before going with the momentum. This is a much-needed awareness around here.
