The story of the week is that U.S. stock markets are at all-time highs even though no one is particularly in love with stocks.
Since all three major U.S. markets reached record highs last week for the first time since 1999, there have been plenty of “partying like it’s 1999” stories (and more than one including a photo of Prince). The twist now is that owning stocks today doesn’t feel like that much fun.
As Ben Inker of Boston fund manager GMO recently said in The Wall Street Journal, “Nobody seems to be particularly optimistic about much of anything and yet the stock market in the U.S. seems to do nothing but go up.”
And strategist Richard Bernstein captures the differences between 1999 and now in his “Charts for the Beach – 2016”:
The difference now is interest rates and bonds. Deep pessimism about the world is keeping bond rates so low that it’s harder to justify not being invested in stocks -- even if reluctant investors don’t like valuations. At least that’s the dominant narrative this week – until it changes.
Just recall that at the beginning of 2016, the dominant narrative was quite different. U.S. stocks had the worse start in history and at one point were down double digits from the start of the year, thanks to anxiety over China, oil and natural resource prices, and emerging markets. How quickly things change.