Markets are getting nervy after stocks have been on a great run higher since March last year. Record highs, and strong stock returns lead many to say, ‘when will the rise halt?’ Of course, this is impossible to say. However, here are a couple of thoughts.

Summertime sadness for stocks?

Firstly, the old saying, ‘Sell in May, and go Away’ is based on statistical data. Stock markets tend to not gain between May and November. So, if there was a seasonal time to jump ship it would be at some point heading into the summer. A summer correction would make sense and would be in line with the general ebb and flow of markets.

The US wants to keep stocks supported

According to one estimate on Bloomberg Market’s Live blog, U.S Households own ~30% of the entire country’s equity. This means that the US have a strong incentive to keep US stock markets supported. Any dip lower will simply find buyers. Any further dip lower, of any concern, will only find further even more buyers.

Here are a few other thoughts about the recent stock rise that have come up in conversation over the last few days:

  • Aren’t indices in a strange period of seeing 20% per annum rises? Surely, this is unsustainable?
  • The S&P500 has risen from ~2200 to around ~4100 over the last recent period, Surely this is unsustainable?
  • With the dot plot likely to shift on an improving US recovery, surely we go back to normal 3-7% p.a returns?

So, the question is, where do we go from here? How leveraged are some of these recent stock buyers? Finally, check out a piece by Ray Dalio he wrote in February asking whether or not the US is in a stock bubble through his studies of previous bubbles.