Are central banks and their interventions leading investors
off a cliff I asked this week, as sentiment indicates desperation to buy every conceivable dip abandoning all sense of risk. Yet corporate insiders are selling strength and asset managers did not buy the rally to new highs, rather continued to reduce long exposure signaling that not all are in the ‘pile in at all cost’ camp.
Indeed Mohamed El-Erian, who previously urged investors to resist the temptation to buy this dip, put out another warning out on Friday:
Confidence is high, as it is in every market bubble, confidence that investors all can get off the train in time. So far this confidence continues to be validated as markets are continuing to avoid any damage that the fundamental global economy would indicate while valuations remain historically stretched and central bank liquidity injections continue to control the price action.
Yet did this vertical surge in equity prices last week put in conditions for a larger sell-off still to come? Indeed did the rejection of new highs amid building negative divergences signal something more sinister? Or will the distortions in markets run unabated forever ignoring all risks?
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