Following positive vaccine news and the run-up in global equities punctuated last week by the Dow hitting 30,000 points, investors are again throwing caution to the wind and growing more uniform in their bets that stocks will continue to rise.
Between the lines: The resurgence of traders' risk appetite has some urging caution, as unanimity in either excitement or fear historically has proven to be a contrarian signal for the stock market.
What's happening: Last week saw a record inflow into stocks, according to Bank of America, which recorded $89 billion of fund flows, surpassing the previous all-time high set in January 2018.
- There was also a record flow of funds into emerging market debt and equities, BofA noted, both of which are considered especially risky.
- That followed a week when data from the Investment Company Institute showed $22 billion of net fund flows into equities, the first week of positive flows since mid-September.
On Wall Street, analysts are raising their S&P 500 price targets and urging clients to increase their allocation to stocks.
- JPMorgan strategists earlier this month said they expect the S&P to reach 4,000 by early next year and raised their 2021 year-end price target to 4,500 — about 878 points, or 24%, above where it closed on Monday.
- Analysts at Goldman Sachs raised their year-end 2021 target to 4,300 and to 4,600 by the end of 2022.
What they're saying: "During most of the bull market since 2009, our projections for the S&P 500 were either the most bullish or among the most bullish of Wall Street’s investment strategists. Now others are getting ahead of us," longtime market bull Ed Yardeni wrote in a recent note to clients.
- "We’ll let them have the glory. We would like to see fewer bulls."
The last word: Bank of America on Friday doubled down on its call for a 2021 that could disappoint the market's freshly minted super bulls, noting that its fund manager survey's "cash rule" was closing in on a sell signal.
- Further, the bank's contrarian Bull & Bear indicator showed increasingly thirsty stock traders and its "breadth rule," which tracks whether global equity markets are overbought or oversold, signaled a sell call on Nov. 11.
- They expect 2021 to be "a year of vaccine not virus, a year of reopening not lockdown, a year of recovery not recession … a year of asset market rotation not asset market rally."
Charted: A sweet November
Stock bulls had a lot to be thankful for in November as all four major U.S. equity indexes held major rallies.
- Despite closing lower on Monday, the Dow rose 11.8%, its best monthly gain since January 1987 and its best November on a percentage basis since 1928.
- The Nasdaq had its best month since April and its best November since 2001.
- The S&P marked its largest monthly percentage gain since April and its best November on record.
- The Russell 2000 rose 18.3% in November for its best monthly gain ever.
Of note: The Nasdaq is up nearly 36% year to date, while the Dow has gained just under 4%, with the Russell up 9% and the S&P 500 12% higher than where it began the year.