This past weekend I attended my high school reunion. It’s remarkable how so many years can go by so quickly. One of the songs from back in the day that was played was "Let The Good Times Roll," which not only captured the spirit back in its original day and the past weekend’s reunion festivities, but also the sentiment of many investors these days. A week ago we had noted in the Weekly Wire that investor sentiment turned bullish for the first time in 16 weeks (snapping the 4th longest bearish streak since 1987), hit its highest bullish sentiment reading since November 2021, and also had its biggest one-week jump since November 2020.
Well, last week sentiment became even more optimistic. There are good reasons to be optimistic though, including the economy being more resilient than many investors expected, corporate earnings bottoming and now moving higher, inflation falling, the Federal Reserve pausing last week in raising short-term interest rates, and the fact we’re in the third year of the Presidential Election Cycle (that usually means a good stock market given favorable monetary/fiscal policy). Also, the market is now up 15% for the year. What’s troubling me, however, about the “letting the good times roll” theme, is a few things. First, valuations for the U.S. market remain elevated. That suggests below-average gains. Second, when sentiment gets very bullish, that also suggests below average returns moving forward. Third, how has the song "Let The Good Times Roll" not made the Spotify walk-up song playlist yet for our weekly podcast The Weighing Machine? If you have any questions or comments, please let me know: rusty@orion.com.
Stay invested. Stay diversified. Stay disciplined.