During bull markets I always get asked about when it’s going to stop. I don’t get asked about stock market bubbles and unsustainable valuations during bear markets, that’s for sure. Those environments come with other kinds of funny questions.
This morning I woke up to one of my college buddies telling me that tech valuations are too high and that this has to be a bubble.
Journalists ask me every day how this can possibly continue. “Too high”, they say. “Too fast”, they tell me. “Fed Printing”, they claim. “It’s only 5 stocks!!!”… I can’t.
Anyway, maybe this is the top. Maybe we are about to crash. Maybe valuations are too high….
But there’s no evidence at all that this is the top. New All-time highs are not characteristic of downtrends. They are things we see regularly in uptrends. In fact, new highs are perfectly normal, and should even be expected in this type of environment.
The opinions of my college friends don’t matter. The opinion of the bond market? Yes, that matters. Currencies? Yup. Metals? Yea probably.
We already covered last week that credit continues to point to higher stock prices. It has nothing to do with a virus or vaccines. It’s only been about credit since this rally started 9 months ago. Don’t get it twisted.
Anyway, to continue with that conversation, I wanted to point out a few other places where we will definitely see signs of a stock market top, if/when it comes. Here is that chart: [Read more…]